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The Danger Of Deeper OPEC+ Cuts

The Danger Of Deeper OPEC+ Cuts

Oil prices jumped as OPEC…

Renewed Calls To Allow US Crude Exports To Mexico

A group of 20 Senate Republicans and one Democrat is urging the US government to resume crude oil exports to Mexico, ending a four-decade ban.

The senators sent a letter on Feb. 18 to Commerce Secretary Penny Pritzker urging her to approve an application from Petroleos Mexicanos, or Pemex, to exchange heavy Mexican crude for lighter US crude. Among the 21 signatures were those of Sen. Lisa Murkowski, Alaska Republican and chairman of the Energy Committee, and Heidi Heitkamp, a North Dakota Democrat.

“It’s time to harmonize North America’s energy trade,” Murkowski said in a statement. For her part, Heitkamp added in a separate statement, “Part of our commitment to a multifaceted national energy strategy means building ties with our North American neighbors through increased collaboration on energy projects and the movement of energy products across our borders.”

Related: North American Energy Integration Could Bring The Planet To Its Knees

In 1973, during the Yom Kippur War between Israel and its Arab neighbors, many Arab oil-producing countries cut off oil supplies to Western nations that supported Israel, including the United States. This caused a severe shortage of oil and a deep spike in its price.

To ensure a stable supply of oil, Congress passed a law that took several steps toward conservation, including banning the export of all US oil. In their letter to Pritzker, the senators noted that in the late 1970s and early 1980s, Presidents Gerald Ford, Jimmy Carter and Ronald Reagan supported similar exports with Canada. In 1985, Reagan allowed oil exports to Canada for consumption in that country.

The senators' letter said the exports to Canada “were in accord with existing statutes and would not threaten U.S. supply. … [W]e encourage the current administration to follow President Reagan’s example by issuing a similar finding that United States oil exports to Mexico, for consumption in Mexico, are in the national interest.”

If the Obama administration agrees to the oil swap with Pemex, it would be at least a third small step away from the 40-year-old ban, after allowing exports of crude to Canada and, last year, allowing the export of condensate, a lightly processed oil.

Related: Drug Cartels Threaten Mexican Energy Future More Than Oil Prices

There has been increasing pressure to loosen the export ban ever since the boom in US shale oil production over the past several years. This oil is known as “light, tight crude,” meaning it is a lighter oil extracted from tight underground shale formations.

Oil may ultimately be fungible, but lighter crude from shale is not suitable for the refineries along US coast of the Gulf of Mexico, which specialize in processing heavier oil. But shale oil is ideal for a swap with Mexico, which would mix it with its own, heavier oil before processing it at domestic refineries.

Murkowski’s proposal would export as much as 100,000 barrels of light crude and condensate per day to Pemex, which would then mix it with its own oil. In exchange, the United States would receive from Mexico heavier crude more suitable for its refineries along the Gulf coast.

The Commerce Department had no immediate comment on the proposal.

By Andy Tully of Oilprice.com

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