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U.S. crude oil producers are banned from exporting crude, but if they treat it just a little bit, they can ship it to foreign buyers.
And that’s what the hullaballoo is about today after the Wall Street Journal reported U.S. Commerce Department rulings that allow two companies, Pioneer Natural Resources (PXD) and Enterprise Products Partners (EPD) to export condensate, a hydrocarbon that can be turned into fuels.
The Wall Street Journal reports:
“In separate rulings that haven’t been announced, the Commerce Department gave Pioneer Natural Resources Co. and Enterprise Products Partners LP permission to ship a type of ultralight oil known as condensate to foreign buyers. The buyers could turn the oil into gasoline, jet fuel and diesel.”
Under the new rulings, condensate is defined as a petroleum product — making it immune to the ban on sending crude oil overseas. The private rulings were confirmed by the energy news blog Fuel Fix, which says the decision “tests the limits of a long-standing ban on exporting U.S. crude.”
The site also notes that the federal agency will require that the condensate is processed, at least to a small degree. And while the new rulings may prod other companies to apply for similar exceptions to the ban, they could also shake up how condensate is categorized.
From Fuel Fix:
“There is widespread disagreement — even within the oil industry — about how to define condensate. The ultra-light hydrocarbon generally flows as a liquid at normal temperatures even if it is a gas underground.
“Because of the varying definitions, it is unclear how much condensate is produced inside the United States, though some energy experts say more than 1 million barrels are extracted daily.”
The new rulings are being reported amid a backdrop of rising gas prices in the U.S., a situation blamed on new violence and uncertainty in Iraq. Those circumstances will very likely weigh on a possible political debate over the oil export ban.
“For months, top Obama administration officials have signaled willingness to relax the export restrictions,” The Wall Street Journal says. “The softened stance is likely to stir up opposition in Congress, where some lawmakers insist that Americans would benefit from lower fuel prices if the government maintains the longtime export ban.”
In an article urging the U.S. to end its ban on oil exports, Blake Clayton of the Council on Foreign Relations wrote last summer that conditions had changed drastically since the ban was enacted in the 1970s — and even more so in recent years.
Agencies/Canadajournal
