Inching Closer to Lifting the Oil Export Ban with Mexico

Keith Kohl

Written By Keith Kohl

Posted August 17, 2015

While low oil prices persist, U.S. shale producers continue cutting back on projects and expansions to cut costs.

And in this market, a major point of contention among producers has been the fight to allow unrefined oil exports out of the U.S. and onto the global market.

Last week, the U.S. approved the trade of unrefined light oil to Mexico in return for heavy sour crude that is more fit for Gulf Coast refineries.

Mexico US TradeAnd as you and I both know, there’s a huge opposition to lifting the decades-old oil export ban.

Director of Columbia University’s Center on Global Energy Policy Jason Bordoff insists that the trade agreement still falls squarely into the ban’s limited exceptions, and that it “should not be interpreted as a policy shift toward greater export liberalization.”

Of course, the usual arguments surfaced along with this news: that exports would increase domestic prices and hurt U.S. refinery businesses.

But make no mistake, even U.S. refiners are switching sides in this argument. Previously, we reported that ExxonMobil was taking a stand to allow exports, citing short-term losses but long-term global gains.

The trade agreement, which will be allowed license for one year starting at the end of August, will be for equal trades of about 100,000 barrels per day, or 1% of U.S. output at the request of Mexico’s state oil company Pemex.

Along with ExxonMobil, such names as Pioneer Natural Resources and ConocoPhillips are looking to benefit from even limited trade allowances. The current restrictions have forced the companies to sell their product at prices discounted from the already low global benchmark.

Democratic Representative Henry Cuellar asserts that allowing trades like this with Mexico will support a restart of expansion and “will further positively impact energy exploration in Texas and the United States.”

As we’ve said before, the Permian Basin in West Texas is the only shale play in the country to have increased production since the oil glut began. Exporting light crude would be a boon to not only those Texas producers in the Permian and Eagle Ford plays, but also the North Dakota Bakken drillers whose main product is the light sweet oil Mexico is more able to refine.

While some firmly insist that this move will stay limited, it seems more likely that it is the beginning of more open trades to come.

To continue reading…

Click here to read the Reuters article.

Until next time,

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Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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