The Commerce Department has quietly given companies approval to export a light form of crude oil in a move that signals the Obama administration is willing to work around a 39-year-old ban on sending crude abroad, according to a report.
Reuters reported that the agency’s suggestion that companies “self-classify” — meaning export without formal authorization — condensate, a lightly processed oil, isn’t a change in formal policy. But the nudge to skirt trade barriers indicates the administration is at least considering changes to the crude trade restrictions.
The Commerce Department in March told a pair of companies it could export lightly processed condensate, which spurred applications from other companies. But the agency paused the practice, and sources have told the Washington Examiner that Commerce is backed up assessing about 30 applications for exporting.
Surging U.S. shale oil production has sent producers looking for markets abroad.
More of them are taking advantage of an exception that permits crude exports to Canada, which in July hit a 57-year high of 401,000 barrels of exports per day. At the same time, U.S. oil and petroleum product imports have fallen nearly 40 percent between August 2006 and September, and now account for one-third of U.S. oil consumption — the lowest level since 1985, according to the U.S. Energy Information Administration.
Commerce did not return a request for comment.
Ending the crude oil export restrictions will be the topic of much Capitol Hill discussion the next two years, not least because incoming Senate Energy and Natural Resources Chairwoman Lisa Murkowski, R-Alaska, is a chief advocate of scrapping the export ban. But many Republicans haven’t declared a position on the topic, as many constituents believe exporting crude would raise gasoline prices.
Whether the export discussion has as much currency in a period of low oil prices remains to be seen. Oil has tumbled from $110 per barrel in June to nearly $50 per barrel, and low prices threaten U.S. shale energy producers because those wells are more expensive to operate than conventional wells.
“That would, if taken up, in the grand scheme of things depress prices,” Deborah Gordon, director of the climate and energy program with the Carnegie Endowment for International Peace, told the Examiner in a recent interview.
While agreeing that allowing crude exports in the current oil price environment could have a “deleterious” effect on U.S. producers, Charles Ebinger, a senior fellow with the Brookings Institution’s Energy Security and Climate Initiative, said lifting the ban would benefit the country in the long term and possibly even lower gasoline prices, albeit modestly.
“Longer term, it’s better to not have this restriction,” said Ebinger, whose Energy Security and Climate Initiative produced a study in September that showed ending the ban would inject between $600 billion and $1.8 trillion into the economy through 2039.
Oil producers contend exports would allow them to find markets for light sweet crude coming from shale regions, as they say U.S. refineries more equipped to handle heavy sour crude are backlogged.
Refiners say those claims are bogus and have warned that exporting crude would raise gasoline prices. Independent refiners, those that don’t produce oil, are keen to keep the restrictions in place. Refined petroleum products such as gasoline don’t face export restrictions, and as a result refiners have enjoyed growing profits during the energy boom.
