Mexican Cartels Now Steal Oil to Fund Violence and Drugs

Along the U.S.-Mexico border, a lesser-known criminal enterprise is thriving. Mexican cartels, notorious for drug trafficking, have turned to stealing and smuggling crude oil, generating hundreds of millions of dollars annually. This illicit trade, known in Mexico as huachicol, has become a significant revenue stream for groups like the Cartel Jalisco Nueva Generación (CJNG), fueling their campaigns of violence and narcotics distribution across both nations.

The U.S. Department of the Treasury recently took action, sanctioning three Mexican nationals and two companies tied to CJNG’s oil smuggling operations. These measures, announced on May 1, 2025, aim to disrupt the financial networks that sustain the cartel’s activities. The move highlights a growing concern: fuel theft is not just a Mexican problem but a cross-border issue with far-reaching consequences for security and economies on both sides.

For everyday people, the impact is tangible. In the U.S., smuggled oil undercuts legitimate businesses, while in Mexico, it siphons billions from state coffers, straining public services. Meanwhile, the profits bankroll fentanyl trafficking and brutal turf wars, leaving communities caught in the crossfire. The question is whether sanctions and law enforcement can stem this tide.

The mechanics of fuel theft are both brazen and sophisticated. Cartels like CJNG exploit vulnerabilities in Mexico’s state-owned oil company, Petróleos Mexicanos (Pemex). They bribe employees, drill illegal taps into pipelines, hijack tanker trucks, or steal directly from refineries. The stolen crude is often smuggled into the U.S., mislabeled as waste oil or hazardous material to evade scrutiny. Once across the border, complicit importers sell it at a discount on energy markets, funneling profits back to the cartels.

The scale is staggering. Mexico’s government reports billions in lost revenue annually due to huachicol, a blow to an economy already grappling with corruption and violence. For CJNG, the high profit margins make oil smuggling a lucrative complement to drug trafficking. A single operation can yield millions, with minimal risk compared to narcotics, as enforcement tends to focus on drugs over energy crimes.

U.S. authorities, alongside Mexican counterparts, are now zeroing in on these schemes. The Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an alert detailing red flags, such as falsified customs documents or suspicious cross-border transactions, to help banks and businesses spot illicit activity. Yet, the cartels’ adaptability and the complicity of insiders on both sides of the border complicate efforts to shut down the trade.

The latest U.S. sanctions target key players in CJNG’s oil smuggling network, including Cesar Morfin Morfin, known as Primito, a cartel leader in Tamaulipas, Mexico. Alongside his brothers, Alvaro and Remigio, Primito has shifted from narcotics to orchestrating large-scale fuel theft, leveraging control over border crossings to smuggle oil into Texas. Two companies, Servicios Logisticos Ambientales and Grupo Jala Logistica, were also designated for transporting stolen crude on his behalf.

These sanctions freeze any U.S.-based assets of the targeted individuals and firms and bar American businesses from dealing with them. The goal is to choke off the cartels’ access to the global financial system, making it harder to launder profits or operate front companies. The Treasury’s Office of Foreign Assets Control (OFAC) has coordinated with agencies like the DEA, FBI, and Mexico’s Financial Intelligence Unit to build a broader net around CJNG’s operations.

However, sanctions alone may not dismantle the problem. Past efforts, like the 2015 designation of CJNG under the Kingpin Act, disrupted specific networks but failed to halt the cartel’s growth. Critics argue that without addressing corruption in Mexico’s institutions or the demand for cheap oil in the U.S., sanctions are a half-measure. Supporters, meanwhile, see them as a critical tool in a multi-pronged strategy to weaken cartels financially.

Oil smuggling is just one facet of CJNG’s criminal empire. Designated a Foreign Terrorist Organization by the U.S. in February 2025, the cartel is a major player in the fentanyl trade, responsible for a significant share of the deadly drug flooding American streets. The profits from oil and drugs enable CJNG to wage war against Mexican authorities and rival groups, perpetuating a cycle of violence that destabilizes the region.

The U.S. response spans multiple fronts. Beyond sanctions, agencies like U.S. Customs and Border Protection and Homeland Security Investigations are ramping up efforts to intercept smuggled goods and cash. Some policymakers advocate for stronger measures, such as deploying advanced surveillance at the border or pressuring Mexico to crack down on corrupt officials. Others emphasize cooperation, pointing to joint U.S.-Mexico operations as evidence that bilateral efforts can yield results.

Yet, perspectives differ on the best path forward. Advocates for a hardline approach argue that cartels must be confronted with overwhelming force, including tighter border controls and penalties for complicit businesses. Those favoring a broader strategy highlight the need to tackle root causes, like poverty in Mexico or addiction in the U.S., to reduce the cartels’ influence. Both sides agree the stakes are high, with fentanyl deaths and cartel violence underscoring the urgency.

The consequences of cartel-driven oil smuggling ripple far beyond the border. In Mexico, the theft cripples Pemex, undermining public trust in institutions and diverting funds from schools, hospitals, and infrastructure. Violent clashes between cartels and security forces, often fueled by huachicol profits, have claimed countless lives. A 2019 pipeline explosion in Tlahuelilpan, sparked by illegal tapping, killed over 130 people, a grim reminder of the trade’s dangers.

In the U.S., the influx of cheap, illicit oil distorts energy markets, hurting legitimate businesses and workers. More alarmingly, the profits sustain the fentanyl crisis, which, despite a 24% drop in overdose deaths by September 2024, remains a public health emergency. The economic cost is immense, with opioid-related losses nearing $1.5 trillion in 2020 alone. For families and communities, the toll is measured in lives lost and futures upended.

Efforts to curb the crisis show mixed results. Public health measures, like expanded access to overdose-reversal drugs, have saved lives, while law enforcement actions have disrupted some smuggling routes. Still, the cartels’ ability to pivot between revenue streams, from drugs to oil, keeps them one step ahead, raising questions about the long-term effectiveness of current strategies.

The fight against cartel oil smuggling is a complex puzzle, blending law enforcement, diplomacy, and economic pressure. The U.S. sanctions on CJNG’s network signal a commitment to disrupting the cartel’s finances, but success hinges on sustained cooperation with Mexico and vigilance from businesses on both sides of the border. Closing loopholes, rooting out corruption, and addressing the demand for illicit goods remain critical challenges.

For now, the border remains a battleground, not just for drugs but for the oil that funds the cartels’ grip on power. Communities in the U.S. and Mexico bear the brunt, grappling with the fallout of violence and addiction. As authorities refine their approach, the hope is to weaken the cartels’ stranglehold, one pipeline at a time, while fostering a future where security and prosperity can take root.