Mexico’s fuel theft scandal is too big for the government to contain

Minister of the Mexico's Navy, Raymundo Morales Angeles; Mexico's President Claudia Sheinbaum Pardo and Minister of Mexican National Defense, Ricardo Trevilla Trejo. Image credit: Sipa US/Alamy

by Luis Rubio, political analyst and Chair of México Evalúa.

Gasoline theft is nothing new in Mexico. One need only recall the 1992 Guadalajara explosion, triggered by stolen gasoline dumped into the city’s drainage system after traffickers failed to sell their cargo during Holy Week. That was just the beginning, in fact, child’s play. Since then, two factors have changed: first, the sheer scale of the stolen-fuel market; and second, the deep entanglement between organized crime and government officials. The central question now is whether the sheer magnitude of this scandal — both in financial terms and in the corruption it exposes — will have significant political consequences.

Today, fuel theft in Mexico takes three forms. The first is the direct siphoning of gasoline from Pemex pipelines, most notably in Guanajuato, a hub crisscrossed by pipelines. The second is crude oil theft, followed by clandestine refining. The third, and most lucrative, is so-called tax-huachicol: gasoline imported but disguised on paper as crude oil to avoid paying taxes. A variation of this scheme involves exporting illegally refined gasoline to the United States, also tax-free, a trade with quite different, in fact geopolitical, implications, beyond the obvious criminal ones.

Illegal fuel sales have existed for decades. What has transformed the landscape is the large-scale importation of untaxed gasoline. This practice has not only gutted Pemex’s finances and undermined federal revenues, but it has also reshaped the very nature of Mexican politics. While pipeline tapping and small-scale refining once represented a relatively limited operation, the illegal importation of gasoline has become a multibillion-dollar enterprise. It rivals Mexico’s largest corporations in scale and lays bare the collusion between organized crime, government institutions, and the financiers who bankroll the trade.

The cost to the public purse is staggering. During the last administration, losses reached an estimated MXN $550 billion — around USD $28 billion — roughly one-quarter of Pemex’s total debt. By any standard, this amounts to theft on a monumental scale.

None of this could take place without government complicity. The smuggling of entire tanker ships several times a week into ports — typically in Tamaulipas — cannot be carried out by a rogue truck driver or a handful of siphoned barrels. It requires customs clearances, port authorizations, railway logistics—in short, a full chain of regulatory approvals that implicates federal officials (in fact, as seen recently, all the way to cabinet level, if not higher), local officials, and everything in between.

On the financial side, countless companies and backers are involved, alongside organized crime groups who ensure distribution through service stations willing -or compelled- to sell illicit gasoline. The result is a corruption scheme without precedent in Mexico’s modern history.

The profits are shared among operators, criminal organizations, and investors — but much of the money also found its way into Morena’s coffers and leadership circles. The evidence is circumstantial but overwhelming: from the murder of Sergio Carmona in 2021, a key financier of Morena campaigns through fuel smuggling, to the mysterious recent deaths of navy personnel, often labeled “suicides.” Each incident points to the depth and breadth of the networks at play.

Politically, the scandal is too vast to be contained. Information is spilling out daily, and the government cannot hope to control it. The real question is whether President Sheinbaum will seize the crisis as a tool, an opportunity, to consolidate her authority — or whether she will remain a passive spectator as the revelations continue to unfold.