Spillovers From Falling Oil Prices: Risks to Mexico and the United States

Geopolitically, U.S. policymakers generally see high oil prices as bad and low oil prices as good for national interests. In a CFR Working Paper I coauthored with Michael Levi and Alexandra Mahler-Haug we find a sustained drop in oil prices will affect at least one of the United States’ closest trading partners and geopolitical allies negatively: Mexico.

Modeling the vulnerability of the Mexican federal budget to a range of oil price declines and assessing the different ways the government might react, we found that severe and sustained declines would force major adjustments in taxes, spending, and debt.

Here are some major findings from the paper:

A summary of the paper can be found here, and the full text here: Spillovers From Falling Oil Prices: Risks to Mexico and the United States.