The U.S. is beginning to slowly lift the 40 year ban on most domestic oil exports to Mexico.
The agreement would allow up to 100,000 barrels a day of light oil pumped in the U.S. to be exchanged for the heavier Mexican crude. The U.S. denied less than a dozen other countries that asked for imported U.S. crude according to Bloomberg.com. The ban on U.S. oil exports began back in 1970 when the U.S. was crippled by the Arab oil embargo and the U.S. reacted with an export ban of their own.
Major energy products such as Exxon Mobil Corp are calling for an end to the export ban after the U.S. oil production boom which is the highest in over 40 years. As oil prices continue to fall, Congress is now pushing to end the policy. Under this current policy U.S. companies can only export refined fuel like gasoline and diesel but not the crude itself, except in specific cases that require special licensing.
“It shows the administration is going to be flexible within existing law to find homes for domestic production,” said John Auers, executive vice president of energy consultant Turner Mason & Co. “With crude prices being low, export restrictions are arguably causing an even greater impediment to domestic production.” (bloom.bg/1MsxdOJ)
There are strict guidelines for both countries involved. The permits that will be issued this month states that Mexico can receive the U.S. oil but must ship similar quantities of Mexican crude back to U.S. refineries. Also, the U.S. crude that gets shipped to Mexico needs to be refined in country.
Petróleos Mexicanos also known as Pemex is Mexico’s national oil company. Pemex stated that U.S. crude is needed to boost gasoline production. Pemex exported over 800,000 barrels a day of mostly heavy crude to U.S. last year and in return Mexico imports around half that in refined gasoline.
“With light crude coming from the U.S., the country will benefit given that Pemex will mix light and heavy crudes which will result in a greater production of gasoline’s and diesel,” Pemex said in a written statement. “In addition, less fuel oil will be produced and higher-quality fuels will benefit the environment.” (bloom.bg/1MsxdOJ)
Some think that removing the ban will increase the price of gas here in the U.S., those who want it lifted think it hinders free trade. As trade slowly opens up, it will be easier to see what the outcome of this agreement will truly be.
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