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Energy Insights: Energy News: Oil exports to Mexico a breath of fresh air

 Energy News

old news articles

Oil exports to Mexico a breath of fresh air


18-08-2015

The Obama administration has taken a step toward helping our oil producers do what they do best produce. It's a baby step but at least it's something.

The Commerce Department approved crude oil exports to Mexico, hailed as a move toward easing the 40-year-old ban on exports of domestic crude.

In the grand scheme, it's more of a feint. U.S. producers can send Mexico as many as 100,000 barrels of light sweet crude or condensate per day in exchange for heavy Mexican crude.

Mexico had been seeking the swap so its refineries could blend the sweeter oil for easier refining. Oil will be coming in for the oil going out, under an existing agreement with Mexico that hadn't been exercised.

It's a long way from ending the export ban. But at least our producers will have the opportunity to export. And it's a hopeful sign from an administration that has earned its reputation for being oil industry-unfriendly.

"It shows the administration is going to be flexible within existing law to find homes for domestic production," John Auers, executive vice president of energy consultant Turner Mason & Co., told Bloomberg News.

That's a flexible interpretation of "flexible." There are strings attached. The U.S. crude sent to Mexico must be refined and used in Mexico. The market for oil is, of course, far from free and is artificially low as a result.

The artificially low price discourages production at a time when energy independence is in the country's grasp like no time since the Arab oil embargo of the 1970s, when the export ban began.

So let's hope the deal with Mexico is a harbinger. It feels embarrassingly redundant to point out the potential upsides for the South Texas economy. The oil price downturn has put a damper on development of the Eagle Ford Shale, which had been driving steroidal economic growth in the region and helped make Texas the nation's leader in job growth.

Who will supply Mexico hadn't been disclosed. But the Eagle Ford is an abundant source for the light sweet crude and condensate called for in the deal and has the obvious geographic advantage of being nearest the Mexican border.

The export ban is a relic of a time when oil was believed to be a finite resource.

Science and the shale oil boom have discredited the so-called peak oil theory.

Today's techniques for extracting oil and gas from shale should have ended that discussion and the ban by now.

Clinging to it as our government has persisted in doing will not save the world from warming itself to death. Developing nations turn to dirtier energy options because we don't fill their needs. Oil counts as an alternative energy source if the other option is coal or wood.

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