US to Takes Steps to Boost Exports of Oil

As prices of oil continue to drop, the Obama Administration threw a bone to domestic oil producers by allowing the export of lightly refined oil collected in the United States, reversing a ban on oil exports in place since the 1970s.

Reuters reports that the US Department of Commerce released a document that describes the types of oil the government is allowing to be exported. The Department of Commerce also said they were reviewing a number of previously filed requests to export.  

One of the oil types which can be exported is ultra-light US crude. This will be a boon to domestic oil producers. This is because drilling for ultra-light crude relies on cheaper, more accessible technology than shale oil, which currently makes up the majority of US oil exports.

The high cost of collecting shale oil is damaging US oil producers because the price of oil on the international market is in free fall, and currently below $60. For shale oil to be profitable, the price of oil needs to be somewhere between $90 and $100.

Saudi Arabia, the most powerful member of the Organization of Petroleum Exporting Countries, recognizes this. As such, Saudi Arabia has said it will not reduce its oil production to protect the price of oil. Many believe the decision is motivated by a desire to hollow out domestic US oil production by putting shale oilers out of business, ultimately lowering the overall capacity for the US to drill for oil.

The new measure will do little good for companies dedicated solely to the collection of shale oil, but those with diversified operations will be able to use the new export regulations to pad their bottom lines and keep themselves solvent until the price of oil recovers.

Reuters says that its is possible exports of crude may increase from the current 200,000 barrels per day to 1 million by the end of 2015.