This Great Graphic, posted by Sumit Roy on Hard Assets, is based on data from the US Energy Information Administration. It shows the surge in US crude oil exports. They totaled more than 250k barrels a day in April, a 15-month high or about 3% of the 8.2 mln barrels a day produced in the US in March.
Ironically, the US has banned crude oil exports for nearly 40 years. What is up with that? It turns out that there are several exceptions that the Commerce Department can grant, and apparently does. According to Roy these include:
- Exports from Alaska's Cook Inlet
- Exports to Canada for consumption or use therein
- Exports in connection with the refining or exchange of strategic petroleum reserve oil
- Exports that are consistent with international energy supply agreements
- Exports of foreign-origin crude
- Exports of California heavy crude up to an average of 25,000 b/d
- Temporary exports or exchanges
Almost all the US crude oil exports have been sent to Canada, according to the EIA.
Separately, earlier this week, the Department of Commerce granted permission to two US companies, Pioneer Natural Resources (NYSE:PXD) and Enterprise Products Partners (NYSE:EPD) to consider its condensate (an oil lighter than regular crude), sufficiently processed to allow it to be exported without a license. Like unrefined crude oil, condensate has generally fallen under the export ban, though the US Department of Commerce indicated this did not reflect a change in policy.
Oil is not a homogeneous product and therein lies a challenge for the US industry and regulators. Essentially, the shale boom has created a large supply of light oil, but the refineries in the Gulf area are designed to absorb the heavy crude, like Venezuela and Saudi Arabia sell. The US production of ultralight or condensate accounts for nearly the entire increase in US output over the last couple of years.
Meanwhile, the US is still importing a little less than half of its crude oil needs. Many in the industry argue that unless there is greater capability to export the ultralight crude or condensate, the resulting glut would drive the price down below levels that would sustain expansion of US output.
Pioneer has not indicated how much condensate it will export, but industry experts are quoted in the press suggesting something on the magnitude of 50,000-100,000 barrels a day. Asia is thought to be the likely destination as there are growing markets, and a number of countries, including South Korea, have significant petrochemical industries.
The exporting of oil is a politically sensitive issue. Increased exports may raise domestic prices to the detriment of American consumers, while at the same time making supply available to foreign businesses. In addition, from a macro point of view, it is better to add value to raw materials before exporting.
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