The U.S. Commerce Department will allow limited sales of U.S. crude to Mexico for the first time ever, just eight months after the Mexican government filed a request to conduct crude swaps.
According to Reuters, the Commerce Department is “acting favorably on a number of applications” to export crude to Mexico,
Crude swaps are exempt from a 40 year old ban on foreign crude exports that was put into place during the Arab oil embargo.
The U.S. exports will most likely be lighter shale crude that requires less refining and is expected to help Mexico’s aging downstream faculties produce more premium fuels.
Mexico will continue to send heavy crude oil to U.S. refineries that are better equipped to deal with those products.
An unnamed official told Reuters the licenses will be valid for one year and will be formally issued by the end of August.
The official declined to comment on exactly how many licenses will be issued but said he expects “a handful” of approvals.
In January, Mexico’s Pemex said it was looking to exchange about 100,000 barrels of crude per day.
U.S. energy groups celebrated the announcement as a step towards increasing global competitiveness but said more foreign export approvals are still needed.
“Study after study shows that free trade in crude oil would promote the creation of U.S. jobs, put downward pressure on fuel costs, and reduce the power that foreign suppliers have over our allies. America is now a global energy superpower, and lifting ‘70s-era restrictions on U.S. oil exports will help bring the benefits of trade home to U.S. workers and consumers,”American Petroleum Institute Executive Vice President Louis Finkel said.
However, experts warned that the move does not necessarily signal an end to all crude export limits.
“Today’s announcement approving requests for oil swaps with Mexico, and rejecting applications for all other destinations, reflects a straightforward reading of Commerce Department regulations and should not be interpreted as a policy shift toward greater export liberalization,” Director of Columbia University’s Center on Global Energy Policy Jason Bordoff told Reuters.
The ban on exporting crude began during the Arab oil embargo with the passage of the Energy Policy and Conservation Act in 1975.
Crude exported from Alaska’s Cook Inlet, crude produced at certain California fields, crude being transported through the Trans-Alaskan Pipeline and crude being shipped to Canada for domestic consumption are exempt from the ban.
There is no ban on exporting refined products such as diesel and gasoline.