U.S. Eases Longtime Ban On Oil Exports

For the first time in almost 40 years, the U.S. Commerce Department has given two American companies permission to export ultralight oil, known as condensate.

The beneficiaries of the move so far are Texas-based Pioneer Natural Resources Co. and Enterprise Products Partners LP. The decision, reported June 24 by The Wall Street Journal, is expected to prompt requests from other companies to export their oil.

Congress banned the export of most U.S. crude oil, except under special circumstances and with specific licensing, in response to the economically crippling Arab oil embargo on shipments of oil to Western countries that supported Israel during the Yom Kippur War of 1973.

Since then, only refined petroleum products such as gasoline and diesel could be exported. Exports of all crude or refined oil to Canada continued without interruption if an exporter had a special permit.

Today, though, so much U.S. oil is being extracted from shale that the price of ultralight oil has dropped appreciably, leading U.S. oil producers to petition for a relaxation of the export ban, arguing that foreign customers would pay more for their product than refiners in the United States.

Pioneer Natural Resources explains that ultralight condensate is minimally processed to remove only its much lighter components such as butane and therefore was refined enough to qualify it for export.

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The Commerce Department's hasn't announced the reported decision - it said June 24 there had been "no change in policy on crude oil exports" - but already there's been reaction in Congress, both pro and con.

Sen. Lisa Murkowski of Alaska, the ranking Republican on the Senate Energy Committee, said the decision represents "a reasonable first step that reflects the new reality of our energy landscape," and she urged the administration to lift the ban altogether.

Sen. Edward Markey, D-Mass., criticized the decision, saying exporting oil puts the United States on a "slippery slope" at a time of great instability in Iraq and Libya and when tensions are high with Russia over its dispute with neighboring Ukraine over Russian gas.

"Congress put this oil export ban in place," Markey said. "It should be Congress that decides when and how to change it, not through a private ruling by the Commerce Department without public debate."

By Andy Tully of Oilprice.com