According to an article in the Wall Street Journal, the U.S. Commerce Department has moved to allow the first exports of unrefined American oil in almost 40 years, allowing oil companies limited exemptions to the ban on U.S. oil exports.
In a pair of “private rulings” that have not been made public yet, the Commerce Department has given Pioneer Natural Resources (NYSE:PXD) and Enterprise Products Partners LP (NYSE:EPD) permits to ship a limited amount of ultralight oil called condensate to foreign buyers.
U.S. Oil Exports – Commerce Department private rulings
The sources for the WSJ article claim the condensate exports could begin by the end of the summer, but are probably going to be small initially. The exact amount if oil that the companies can export is apparently not specified the rulings, which were issued in January. The necessary permits and licenses for the two companies to export the oil were issued by Commerce Department‘s Bureau of Industry and Security.
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The private rulings issued to date apply just to the two named companies, which received permits to export processed condensate from south Texas’ Eagle Ford Shale formation.
The Commerce Department’s approval of these request will almost certainly encourage similar requests from other companies, and the department is working to develop guidelines for companies that wish to sell U.S. oil abroad.
Ban on U.S. oil exports
Congress initially imposed the ban on U.S. oil exports following the Arab oil embargo of the early 1970s, and the law states that U.S. companies can export refined petroleum products but not crude oil except under special circumstances (requiring a license). The export ban doesn’t really apply to Canada as oil companies have long been able to relatively easily secure the special permit required to export oil to Canada.
Many oil company executives, analysts and even public officials have questioned the importance of maintaining the ban on U.S. oil exports today given the ongoing shale boom.
Republicans likely to oppose Obama administration decision
Obama administration officials have signaled the possibility of a relaxation on the crude export restrictions for some time. That said, this new stance is likely to be opposed by many Republicans in Congress, who argue that would the ban on U.S. oil exports has helped keep fuel prices lower. The move could see even more opposition today given oil prices are back above $100 a barrel with ongoing political unrest in Iraq, Libya, Syria and Ukraine.