Dun & Bradstreet Logo

Mexico oil barrel
Stuart Hampton

US Approves Historic Oil Sale to Mexico

by Stuart Hampton | Dun & Bradstreet Editor

August 17, 2015 | No Comments »

Mexico oil barrelBusiness opportunities are opening up for US businesses as old trade embargoes begin to break down.

In the shadow of the historic reopening of the American embassy in Cuba after more than 50 years of an economic and diplomatic ban on relationships between those two countries, another decades-old US economic ban is also slowly being lifted.

The US Department of Commerce is very quietly reversing the ban on US oil exports that has stood for more than 40 years (back to 1973 when an oil-hungry US, crippled by the Arab oil embargo, adopted an export ban as a countermeasure).

Under rules imposed then, US companies can only export refined fuel such as gasoline and diesel but not oil itself except in limited circumstances that require a special license.

Earlier this month the Commerce Department informed members of Congress that it intends to approve an application by Mexico’s national oil company, Petróleos Mexicanos (Pemex), to enter into oil trade agreements with US companies under which Pemex could exchange as much as 100,000 barrels a day of its heavy crude for the lighter oil pumped in the US.

The glut of ultralight oil from shale formations in recent years has meant that prices have fallen dramatically below traditional crude oil prices. As a result, producers have lobbied aggressively to relax the export ban, pitching the US government that they could get a higher price from foreign buyers than they can from US refiners.

The move to approve this major trade with Mexico comes a little over a year after the US began to allow companies to export ultralight oil to foreign buyers.

This deal will help American shale-oil drillers by giving them access to a major purchaser for their oil at higher prices.

It may also give cover for the Obama administration if it chooses to reject the Keystone Pipeline. US refiners can get access to a similar heavy crude oil from Mexico that it would get from Canada without raising the hackles of environmentalists by having it cross the US continent via TransCanada’s proposed pipeline.

Congress has yet to officially lift its decades-old embargoes against trading with Cuba and exporting oil from the US.

However, the American flag now flies in Havana, and informal trade talks are going on, and US crude is beginning to flow into Mexico.

British editorial veteran Stuart Hampton has been covering oil and gas companies for Hoover’s since the Neogene-Quaternary period. Well, actually, since the early 1990s. For the best overview of the oil industry and its history he recommends Daniel Yergin’s “The Prize.” You can also follow Stuart on Twitter.

Leave a Reply

Your email address will not be published. Required fields are marked *