U.S. allows oil exports for the fist time in four decades

Oil Pump Jack
Source: DollarPhotoClub

Two Texan companies – Pioneer Natural Resources of Irving, and Enterprise Products Partners of Houston – have been allowed to export unrefined oil for the first time in four decades, The Wall Street Journal reported on Tuesday.

“With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter,” the Journal said.

This is seen as the first step towards lifting the ban on crude exports which has been in place since 1970’s. The ban was to safeguard energy security, but with the surge in production from shale-based deposits there has been pressure to allow exports from areas like the Gulf of Mexico, even as the country imports crude through east coast ports.

According to the US Deputy Secretary of Energy, Daniel Poneman, the United States’ shale oil production is expected to grow from its current capacity of 8.4 million barrels per day (bpd) to 9.6 million bpd by 2019.

Poneman, who was in Abu Dhabi to give a lecture titled, “Energy and Security in a Changing World,” added that “Today, 40 per cent of our natural gas production comes from shale annually. [Shale] has utterly transformed our energy economy. In the last four to five years, reliance on imports of oil dropped from 60 per cent to less than 40 per cent.”

This abundance, however, is not distributed evenly; causing distribution bottlenecks and leading to regional surpluses. The lifting of the ban on exports would be very welcome by the oil and gas industry as it would push the prices up and make shale exploration more economical. Not everybody agrees, though. There is a strong resistance from chemical and manufacturing companies which are currently benefiting from low-priced feedstocks. U.S. manufacturing is experiencing a renaissance with costs of production on par with those in Eastern Europe. There are concerns that lifting the ban on exports would make American companies less competitive in the global market.

So far, the ban has not been lifted. Instead, The Commerce Department made a special ruling to allow the export of ultra-light condensate on the grounds that it has been processed enough to qualify it for export, even if it has not been refined. The US already exports large volumes of refined oil products.

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