Imagine not being able to get gas for over 10 days. It would be hard to get to work or bring the kids to school, not to mention the supermarket not getting any fresh food, nor your favorite restaurant. Annoying, right? Back in 1938 not a lot of Mexicans had cars, nor did they have supermarkets, but president Lázaro Cárdenas was annoyed enough over the fact that trains couldn´t run normally, disrupting public life completely. Unlike us, however, he did have the power to do something about it.
The story starts all the way back in 1935, when Mexico´s oil workers started demanding more money and tried to unite in labour unions. The oil companies immediately decided that this kind of worker influence was a bad thing and did their utmost to keep salaries low and benefits as non existent as before. Bad luck for them, because on January 29 1936 several recently founded oil worker unions managed to unite in the Confederation of Mexican Workers (Confederación de Trabajadores de México, CTM). A few months later, in July 1936, the CTM organized a convention and demanded an improvement in the contracts of its members. The big oil executives were of course not very fond of improving worker conditions, as it only meant earning less. Their refusal caused the CTM to announce a massive strike.
After even president Lázaro Cárdenas intervened, trying unsuccesfully to get the oil companies to sign improved contracts with their workers, the CTM had enough and on May 28th 1937 the oil workers kept their promises and cut off the oil production completely. Without them - no oil, so gas stations around the country started drying up. President Cárdenas intervened once more (this time succesfully) and convinced the workers to get back to work while a solution was sought.
Oil companies claimed that they were not unwilling, but simply unable to meet union demands because of their financial instability and lack of funds. President Cárdenas was clearly annoyed, and on March 18 1938 he announced the expropiation of all oil companies in Mexico. Fellow editor Richard Grabman wrote about this day on his blog.
All foreign oil companies would be gathered as a government controlled institution, called Petroleos Mexicanos, or Petromex. That company, later renamed Pemex, started taking over all Mexican oil concessions and on June 7th 1938 concluded the initial phase. Although foreign companies did receive compensation (Mexico would finish paying off the debt in 1962), especially Great Britain, where one of the bigger companies was based, was angered and even broke off all diplomatic relations with the Mexicans. The United States and The Netherlands, home to other affected companies, initially agreed to boycott Mexican oil, but later chose to accept things as they were. Pemex was now officialy in business.
Over the years, Pemex has by and far become the most important company in Mexico. In terms of revenue it´s even the biggest company in Latin America. Furthermore, Pemex is responsable for over 40% of Mexico´s total government income. In other words: without Pemex Mexico would not even be close to where it is now. In a sort of clever but highly artificial way to inflate it´s earnings even more, the federal government doesn´t tax profits, but the entire revenue. There´s no incentive whatsoever to be profitable, money flows into the treasury anyway, based on what´s being sold.
Non-public oil companies, most of which are owned by a large amount of different shareholders, are commercialy obliged not only to sell as much as they can, but to make as much profit as possible while at it. In their study called ´The Revenue Efficiency of Pemex: A Comparative Approach´ investigators Peter M. Hartley and Kenneth B. Medlock III, both working for the James A. Baker III Institute for Public Policy at Rice University, have a lot to say about that.
Their main conclusion is that Pemex simply hasn´t been able to add value to their oil and that ´there is strong evidence of over-employment by Pemex´. Looking at the figures their conclusion makes sense, because in the years 2001-2009 the revenue per employee at Pemex was a meager $ 585,000. Might sound like much, but Shell employees on average boasted a revenue of $ 3,282,000, ExxonMobil´s people averaged $ 3,496,000 and German company Wintershall is number one with a whopping $ 5,955,000 per employee. Brazilian Petrobras, often compared with Pemex, currently stands at $ 1,038,000. Positive note: Pemex does way better than Russia´s Surgutneftegas which has employee revenue of only $ 160,000.