Cartels Turn to Oil Smuggling Amid Fentanyl Crackdown

Since coming into office for a second term, President Donald Trump (R) has intensified the fight against fentanyl trafficking, but Mexican drug cartels are now turning to a lucrative alternative: oil smuggling.

According to the U.S. Treasury Department, cartels like the Sinaloa and Jalisco New Generation (CJNG) organizations, which are now designated Foreign Terrorist Organizations (FTOs), have stolen billions of dollars in crude oil from Mexico’s state-owned energy company, PEMEX, and sold it to complicit U.S.-based oil and gas companies.

The Financial Crimes Enforcement Network (FINCEN) recently issued a warning to financial institutions outlining how stolen oil is disguised as “waste oil” and funneled through small companies along the southern U.S. border. This includes the Lower Rio Grande Valley, southeastern New Mexico, and cities like Houston and Dallas.

Each tanker shipment can yield cartels up to $5 million in profits.

“They're saying: you may not be a member of these organized crime [groups], but if you are part of this operation, this will have a different implication for you,” said Cecilia Farfán-Méndez of the Global Initiative Against Transnational Organized Crime. She emphasized that U.S. actors aiding FTOs could face serious legal consequences for money laundering and terrorist financing.

Much of the smuggling operation is obscured by shell companies and legal trade pathways, which makes it difficult to detect. “If you are also carrying out this activity in Texas, which has a very strong oil industry, picking out these criminal actors is not going to be that easy,” Farfán-Méndez added.

Claudia Sheinbaum, Mexico’s president, has responded to the concern by placing customs under military control, aiming to combat corruption. However, experts say the scale of the problem implicates far more than just rogue operators.

“This is not just an operation that involves some bad guys,” said Guadalupe Correa-Cabrera of George Mason University. “It’s a big, big business.”

“Treasury will continue to use all available tools to relentlessly target drug cartels and foreign terrorist organizations to Make America Safe Again,” a Treasury spokesperson noted.

Despite cross-border cooperation, the challenge of tracing the money and exposing complicit actors persists.

On X, Rep. Dan Crenshaw (R) commented on the issue, reminding any businesses that might be involved in the ordeal that “cartels are now foreign terrorist organizations – you’re complicity in funding a terrorist organization,” noting that Attorney General Pam Bondi would be responding accordingly.