Mexico’s drug cartels, which have long made money by smuggling illegally obtained oil into the U.S., are also smuggling fuel back into Mexico in a scheme to sell the product at full cost while ducking taxes, U.S. authorities say.
As much as one-third of all fuel sold in Mexico may be illicit, and the Mexican government is losing “tens of billions of dollars a year in tax revenue,” the Treasury Department said.
Fuel smuggling is now the cartels’ second-largest source of income behind drugs, surpassing migrant smuggling. Experts say the market for migrant smuggling has largely dried up with President Trump’s border controls.
The Trump administration took steps to fight back last week by slapping financial sanctions on two men and nine firms associated with the Jalisco New Generation Cartel, or CJNG.
“Today’s action highlights the extent to which Mexico’s cartels are expanding beyond traditional drug trafficking to generate revenue for their criminal organizations, which continue to traffic deadly drugs that kill Americans,” Treasury Secretary Scott Bessent said in announcing the sanctions.
In February 2025, the Trump administration designated CJNG and several other major Mexican cartels as foreign terrorist organizations, escalating a decades-long effort to constrain them.
The State Department said the fuel theft is also a “threat to legitimate U.S. businesses and the U.S. financial system.”
Treasury experts said southbound smuggling is spurred by Mexico’s tight control over fuel import permits and the price differential between the two nations. Fuel costs are significantly lower in the United States than in Mexico.
Huachicoleros, as the smugglers are known in Mexico, avoid official Mexican-licensed importers and sell the fuel directly to smaller distributors and retailers, thereby avoiding the duties they are required to pay.
Huachicoleros have operated for years, but cartels in recent years moved to co-opt them and “effectively seized control of this illicit fuel and oil market,” the Treasury Department said.
The operation relies on complicit U.S. fuel traders who sell fuel to huachicoleros, who then ship it across the border, mislabeling it as hazardous waste or waste oil. The fuel is taken to cartel-controlled storage facilities and slipped into Mexico’s market.
False invoices cover sales, and digital cross-border money transfers keep everything flowing, officials said.
The profits fund the cartels’ overall operations.
U.S. officials alerted banks in May 2025 to be on the lookout for suspicious cartel-related fuel transactions. In the roughly 14 months since then, banks have filed 160 suspicious activity reports totaling more than $7 billion in questionable activity.
Most of the reports center on Texas, though officials also mentioned Florida.
The southbound smuggling is just part of the problem. Cartels also steal oil from Mexico’s state-owned firm, Pemex, and ship it to complicit brokers in the U.S., chiefly in Texas and New Mexico, where it becomes part of the U.S. supply.
Treasury officials named the Sinaloa Cartel and the Gulf Cartel in connection with fuel smuggling, but CJNG dominates the reporting.
The two men sanctioned on June 30 were Oscar Guillermo Juraidini Silva and J. Refugio Ruiz Villagomez.
Authorities said Mr. Juraidini Silva builds and operates shell companies for CJNG, helping create the false paper trail required for fuel smuggling.
Mr. Ruiz Villagomez is accused of being a fuel smuggler.
In addition to fuel smuggling, the Trump administration says, CJNG makes hundreds of millions of dollars off timeshare fraud, particularly in the Puerto Vallarta area.
Mexican-based call centers duped people into buying or renting timeshares that did not exist, then called back — operators pretending to be a law firm — offering to sue to recover the victims’ money, all while collecting fees but never delivering results. In a final twist, operators sometimes posed as government investigators, promising to recover victims’ money — again for an advance payment that was never returned.
Like fuel theft, the scam operated for years before the cartel moved in to take it over.
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