Event Recap

On March 31, 2020, the Atlantic Council’s Global Energy Center and the Adrienne Arsht Latin America Center, in partnership with the Brazilian Center for International Relations (CEBRI), hosted a conversation with leading experts on the impacts of the oil market crash on major oil producers in Latin America, namely Brazil, and Mexico. 

This discussion was co-moderated by Randolph Bell, director of the Global Energy Center and Richard Morningstar chair for global energy security, and Jason Marczak, director of the Adrienne Arsht Latin America Center. Following introductory remarks, the co-moderators were joined by Jorge Camargo, vice president of the Board of Trustees at the Brazilian Center for International Relations (CEBRI), and member of the board at the Brazilian Institute of Petroleum, Gas, and Biofuels (IBP); David L. Goldwyn, president of Goldwyn Global Strategies, and chair of the Atlantic Council’s Global Energy Center’s Energy Advisory Group; Sarah Emerson, managing principal at ESAI Energy; and Dr. Francisco J. Monaldi, fellow in Latin American energy policy and interim director of the Latin America Initiative at Rice University’s Baker Institute. 

The conversation began with a macro look at the global impacts of the oil market crash on producers while surplus production continues to depress prices. Ms. Emerson forecasted that the unprecedented low prices are not sustainable, and that producers will soon have saturated inventory capacity given the supply surplus. She added that producers will soon be forced to face either voluntary, or involuntary cuts, before the price starts to climb again. Dr. Monaldi proceeded to give an overview of the Latin America region at large, and emphasized that, although Mexico and Brazil are the region’s largest oil producers, Ecuador, Venezuela, and Argentina would face significant challenges in the near future as they are net exporters of crude oil. Mr. Goldwyn and Dr. Monaldi discussed the state of Pemex, Mexico’s national oil company, and the dire need for the Mexican government to re-evaluate the future of the oil sector and existing refineries. 

Mr. Camargo also highlighted Brazil’s position and the impact of the oil market on the nation and Petrobras. As he mentioned, Brazil’s economy is generally more diversified, leaving the country in a better position to recover than others. Ms. Emerson added that Brazil has become a growing market by selling higher-quality crude oil to China, compared to a less powerful symbiotic relationship that Mexico has with the United States. Unlike other oil-producers in the region, Petrobras and Brazil have shown significant resilience to low oil prices for several reasons. Brazil is an offshore deep-water player; offshore rigs account for almost 70 percent of Brazilian production, which is dominated by Petrobras and big international oil corporations. And production outlook is robust; the country’s pre-salt reserves are extraordinary productive, yielding tens of thousands of barrels per day. Another contributing factor to Brazil’s resilience is their sizeable market, which exports large volumes of oil to India and China, countries for which it is in their best interest to have a reliable supply of oil. In its current state, Pemex, on the other hand, has a lot to lose given its instability, and already-significant debt. Pemex and Mexican President Andrés Manuel López Obrador will soon have to make pragmatic decisions on how the oil industry should move forward. 

In terms of the energy transition, all speakers agreed that when demand increases and the market recovers, the low prices for gas and renewables will lower the cost of decarbonization, which will be a great opportunity for countries to achieve climate and energy diversification goals. Mr. Goldwyn pointed out the fact that countries have a golden window to reduce subsidies now since the impacts are effectively invisible, therefore enabling renewables to be more competitive when the market recovers. Mr. Camargo specifically highlighted the impact of the oil price crash on ethanol prices in Brazil—pointing out the linkage between oil and ethanol prices due to caloric equivalences—and expressed concern for the ethanol sector, which may not be able to survive such low prices. 

Looking at the global situation, the oil market crash has had worldwide implications, and Latin America is no exception. Current prices seem to be lower than future projections and so it is only a matter of time before inventories are at full capacity and production cuts will be necessary. 

Over the last couple of weeks, international oil prices have plunged after OPEC+ members failed to reach an agreement on March 6 to cut production and address demand retrenchment caused by the coronavirus outbreak. The price war between Russia and Saudi Arabia that has followed is placing a high toll on many Latin American economies, which are highly dependent on oil prices. The consequences are already being felt. This major external shock on a key sector may obstruct economic recovery in Mexico and Brazil. What would this oil market crash mean for these two major oil-producing countries in Latin America? How resilient are Brazil and Mexico’s energy sectors to fend off this price crash?


Jorge Camargo
Vice-President of the Board of Trustees
Brazilian Center for International Relations (CEBRI);
Member of the Board
Brazilian Institute of Petroleum, Gas, and Biofuels (IBP)

David L. Goldwyn
Goldwyn Global Strategies;
Global Energy Center’s Energy Advisory Group, Atlantic Council

Sarah Emerson
Managing Principal
ESAI Energy

Francisco J. Monaldi
Fellow in Latin American Energy Policy; Interim Director, Latin America Initiative
Rice University’s Baker Institute

Randolph Bell
Director, Global Energy Center; Richard Morningstar Chair for Global Energy Security
Atlantic Council

Jason Marczak
Director, Adrienne Arsht Latin America Center
Atlantic Council

Sponsored By