US President Obama’s administration on Friday gave oil companies temporary permission to export a limited amount of oil to Mexico at a time when a glut is cutting into domestic petroleum profits and employment.
The decision by the US Department of Commerce fell short of removing a ban on crude exports that goes back to the 1970s, when international oil boycotts produced long lines at gasoline stations and threatened the US economy. It also does not make a broad national security exception for Mexico, which has long existed for Canada, to release larger-scale exports.
However, support for an end to the ban is growing in US Congress among Republicans and Democrats from oil states such as Texas. Obama’s administration has been reluctant to remove the ban, although it has given permission over the past two years to US producers to sell some extra-light forms of crude, called condensates, on a limited basis.
The oil industry lent cautious applause to the Obama administration’s move, but repeated its calls for a complete end to the export ban.
The sales to Mexico are to come in the form of swaps of different grades of oil. US refineries on the Gulf of Mexico are designed for the heavy oil produced in Mexico and Canada, while Texas and Oklahoma shale fields near refineries in those states are producing an abundance of light oil.
The Mexican market could help relieve a glut that threatens to overwhelm US storage facilities once the summer driving season is over. Mexico could benefit from importing the lighter US crude, which it could blend with its domestic product to make it easier and cheaper to refine locally.
The approval signals growing energy coordination between Washington and Mexico City, with Mexico moving forward with a sweeping reform that would allow foreign companies increasing latitude to invest in Mexican energy. Exports of US natural gas are also increasing, partly relieving a gas production glut in Texas.
However, the Obama administration is unlikely to lift the export ban entirely, in part because environmentalists said it would encourage more petroleum development and hydraulic fracturing at a time when the nation should be pivoting away from fossil fuels to curb climate change.
Some domestic refiners argue that removing the ban would increase gasoline prices, a contention disputed by producers who contend that more US oil on international markets would actually bring energy costs down.
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