Although the department turned down other swap applications from Asia and Europe, the move is the latest weakening of the blanket ban on the export of U.S. crude oil first imposed at the height of the OPEC oil embargo in 1975. Such oil swaps are one of several possible exemptions allowed in the four-decade-old law that otherwise bans most overseas shipments.
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That’s according to a senior Obama administration official who wasn’t authorized to comment by name and requested anonymity.
American shale drillers should benefit from the new exports after a recent glut in oil has helped drive prices down over the past year – domestic oil production has grown to more than 9 million barrels a day. Mexico’s state-run Pemex oil company had asked for the right to acquire 100,000 barrels of American lighter, higher-quality crude oil from shale a day as its own production levels have fallen. That proposed project would carry crude oil from Canada’s tar sands to refineries on the Texas Gulf Coast, so the influx of heavy crude from Mexico could play into a decision about whether the controversial pipeline is necessary. The licenses will be issued at the end of August and will be valid for one year.
Proponents of exports say that, with domestic oil production reaching record highs, the ban is outdated. But Republicans, including House Speaker John Boehner, have said those days are long gone, arguing that lifting the ban could make the U.S.an energy superpower and boost the economy. Apart from a limited exchange of oil for the U.S. strategic reserve in the late 1990s, Mexico has not had access to U.S. oil.
The move is likely to weigh on Brent crude prices.
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“If you look at the regulations that the Commerce Department has set, they set a pretty low bar for swaps with Mexico, it’s just that nobody had asked before”, Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy, Bordoff, a former energy adviser to President Obama, said in a phone interview.
