Mexican Drug Cartels Now in the Oil Business

Things are tough all over -- even for Mexican drug dealers.

Feeling the pinch thanks to the crackdown by Mexican President Felipe Calderon, and having lost millions of dollars in seized contraband, Mexico's drug cartels are having trouble maintaining their bottom line. Facing difficulty in moving their product north, they have to sell more of it domestically. But the trouble there is that Mexican customers refuse to pay the high prices that the traffickers are used to getting from Americans and Canadians.

So what’s a drug lord to do? Answer: Diversify.

The Mexican cartels have already expanded into prostitution, extortion, kidnapping, and immigrant smuggling. Now, they're dabbling in ... the oil business?

Move over, J.R. Ewing. Make room for Joaquin “El Chapo” Guzman. There is no evidence that the leader of the Sinoloa drug cartel -- a billionaire businessman who came in at No. 701 on Forbes magazine's list of the world's wealthiest people -- was involved in this latest scheme. But anything is possible. Stranger things have happened south of the border.

And these events are stranger than most. According to the U.S. Justice Department, American oil refineries bought millions of dollars worth of stolen oil last year siphoned from Mexican government pipelines and smuggled north across the border. Here's how it works: Drug gangs tap into pipelines in remote regions of the country -- or sometimes even build pipelines of their own to divert the flow -- and siphon off hundreds of millions of dollars worth of oil.

Then all these poachers need is a market. And, as with illegal drugs and illegal immigrants, there's a market up north. Apparently, the lure of cut-rate crude is tough to resist for some. At least one U.S. oil executive, who was apparently at the receiving end of the scheme, has pleaded guilty to conspiracy. Donald Schroeder, president of Houston-based Trammo Petroleum, agreed to pay a $2 million fine and still faces the possibility of jail time when he is sentenced in December.

Meanwhile, the U.S. Homeland Security Department intends to return $2.4 million to Mexico as a result of a bi-national investigation. Authorities expect more arrests and more seizures of stolen oil. No telling how deep this well goes.