Last December, the United States government voted to lift four-decades of restrictions on crude oil exports as part of a bipartisan effort to prevent another government shutdown caused by political paralysis on Capitol Hill.
The restrictions—which made Canada the U.S.’ main export destination for crude oil for decades—came into being after the 1975 Arab Oil Embargo sent shockwaves across the American economy.
Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an Embargo against the United States and its allies for their political decision to sell military supplies to Israel during the 1973 Arab-Israeli War.
The U.S. legislature enacted the new policy to keep American energy supplies within its borders and alleviate the nation’s dependency on foreign powers.
In the second half of 2015, arguments against the regulations came from American oil companies, including Continental Resources, Pioneer Resources and ConocoPhillips, who wanted the policy change in order to prevent oil prices from falling and causing new ventures to become unprofitable.
However, even after the restrictions were lifted, January’s oil price crash managed to wreak havoc on the industry for the second time in less than two years, and oil prices have zigzagged and shown no strong signs of recovery.
In March 2016 – just one quarter after the restrictions were lifted – crude exports to countries other than Canada exceeded exports to Canada for first time since April 2000.
Though the growth of the volume of crude oil exports has fallen since the trade-policy shift, the total number of countries buying energy supplies from the U.S. has climbed sharply. So far this year, American suppliers have done business with 16 different countries – six more than in 2015 and twice as many as in 2014. Related: The Blue Energy Breakthrough: Replacing Fossil Fuels With Osmosis
So, what countries have been importing American crude with the most zeal?
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Curacao, an island located in the Caribbean Sea off the coast of Venezuela, has imported 54 percent of American crude between the months of January to May of this year, when Canada is excluded from the calculations. The five-month average came out to be 54,000 barrels of crude per day – most of which was used to supply the 330,000 bpd Isla refinery run by Venezuela’s state-owned energy company, Petroleos de Venezuela (PDVSA).
American supplies have replaced Nigerian crude supplies to Isla since March, though, according to an earlier report by Oilprice.com, the African nation’s militancy crisis is unlikely the cause of the supply chain shake-up.
Curacao has been using the light American crude to dilute a version of heavy Venezuelan crude in order to prepare the formula necessary for re-export to Venezuelan customers or further processing at Isla. Related: Russia Delays $10 Billion Rosneft Privatization Due To Low Oil Prices
The Netherlands has become the United States’ second most loyal customer after Canada and Curacao. Amsterdam, Rotterdam and Antwerp share the 39,000 barrels of American crude the country receives every day.
Italy, France and the United Kingdom have also developed new crude import contracts with American suppliers, likely as part of an effort to wean the European continent off Russian fuel. As the European Union and Russia find themselves on opposite sides of the Syrian Civil War and other issues of international concern, America’s newest energy trading partners have publically released plans to replace Mother Russia’s leverage.
Quirks within documentation required by the United States Customs and Border Protection have made the Marshall Islands - located in the Pacific Ocean next to Hawaii – a 14,000-barrel a day “importer” of U.S. supplies, despite the fact that they have no refineries. American trade rules require ships transporting U.S. products to specify their final destination, even if the cargo has not officially been purchased as of its departure. So although we don’t know where exactly this 14,000 barrels per day ends up, we can be sure it’s not the Marshall Islands.
Many ships with energy cargo dock for short periods in the Marshall Islands as they await a buyer, likely in Asia. What this means is that these small Pacific islands have emerged as a major export destination—at least technically—without hosting a single refinery.
In South America, Panama, Nicaragua, Columbia and Peru have taken small shares of America’s export market – five percent or less a piece.
American crude has been reaching new corners of the world since restrictions ended in December. Though U.S. crude production remains bound in order to limit the size and scale of the global oil glut, new costumers in a bear market will help the American export industry procure large contracts once the market recovers.
By Zainab Calcuttawala For Oilprice.com
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