Tapped Out

“The great thieves lead away the little thief.” – Diogenes

In February, the oil tanker Cosmic Glory was carrying a load of diesel from the US Gulf Coast to Mexico. Upon its arrival at the Port of Tampico, it informed Mexican authorities that it was carrying not diesel but additives for lubricant oils, allowing it to avoid fuel import taxes. The ship docked at a cargo bay lacking the usual infrastructure to handle and store liquid hydrocarbons. Instead, it was met by a long line of trucks eager to tap directly into the ship’s valuable inventory, transporting the fuel into Mexico’s notoriously large black market. All of this was done under the direction of drug cartels, who profit handsomely from such illicit operations.

These and dozens of other explosive accusations were detailed in a remarkable piece of investigative journalism published by the Financial Times in June—a story that shocked industry observers by revealing the sheer scale of the sophisticated operation:

“Estimates from the last five years suggest that illegal diesel and gasoline make up anywhere between 16 and 27 per cent of Mexico’s annual fuel consumption — between 172,000 and 290,000 barrels per day. That could have a final retail sale value of between $12bn and $21bn a year…

Vast organised crime networks, some connected to major drug cartels such as Jalisco New Generation Cartel, known as CJNG, are exploiting Mexican import policies and using bribes, coercion and violence to smuggle fuel from the US and flood the market with discounted diesel and gasoline. The illicit trade is now playing a key role in financing these groups, with stolen fuel becoming the most significant non-drug revenue source for Mexican cartels, according to the US Treasury’s Office of Foreign Assets Control.”

Cartel smuggling is not limited to imports. Drug gangs regularly steal significant quantities of crude oil from domestic producers, particularly Petróleos Mexicanos (Pemex), the country’s dominant national oil company. Pipelines are tapped, employees are bribed or threatened, and dozens of shell companies are used to cloak the crimes. This crude is then smuggled back to the very US refineries that produced the diesel carried by tankers like the Cosmic Glory, completing a lucrative circle of molecular and monetary flows.

The situation has gone so out of control that the Department of the Treasury’s Financial Crimes Enforcement Network issued an official