The U.S. Commerce Department will allow limited sales of U.S. crude to Mexico for the first time ever, just eight months after the Mexican government filed a request to conduct crude swaps.
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But make no mistake, even U.S. refiners are switching sides in this argument. Companies may also want to consider engaging with lawmakers in Congress who are now contemplating legislation to repeal the export ban on crude oil altogether.
“Trade with Mexico is a long-overdue step that will benefit our economy and North American energy security, but we shouldn’t stop there”, said API Executive Vice President Louis Finkel. A major crude exporter for decades, Mexico has seen its oil production fall in recent years.
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”.
It is understood that under the deal, any U.S. oil sent to Mexico will have to be refined within that country.
Bloomberg cited Pemex as saying: “With light crude coming from the US, the country will benefit given that Pemex will mix light and heavy crudes which will result in a greater production of gasolines and diesel. It will have the effect of driving the worldwide price down for sure as we move more oil into the global market place”.
As previously mentioned, BIS signaled its impending approval of a number of swap transactions involving Mexico. And late last week, senior officials told Reuters they are now “acting favorably” on such permits.
The department intends to allow state-owned Petroleos Mexicanos (Pemex) to deliver heavy Mexican crude oil in return of up to 100,000 barrels a day of light crude and condensate from the US. This announcement is consistent with the existing legal framework that favors crude oil exports with adjacent countries.
This of course isn’t an “export” in the strict sense. For consumers, study after studyprojects that exporting domestic crude would put downward pressure on U.S. gasoline prices, ranging from 1.7 cents up to 12 cents per gallon. Barton recently stated that he has secured a commitment from the House leadership to move the bill, which now has 113 co-sponsors, including 13 Democrats. The light crude in the deal represents some of the domestic oil that’s accumulating and trading at a discount to global prices, unable to reach the world market because it’s shut in by an outdated, anti-competitive oil exports ban. Although timing for Senate floor consideration is unclear at this point, the OPENS Act would likely require 60 affirmative votes for passage.
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In response to the Administration’s action, Senate Energy Committee Chairman Lisa Murkowski (R-AK), issued a statement characterizing it as a positive step, but reiterated her commitment to “the full repeal of the ban on selling oil to our friends and allies overseas…as quickly as possible”.
