News / Economy

US Opens Taps, a Bit, on Oil Exports to Europe

FILE - A pumping unit sucks oil from the ground near Greensburg, Kansas.
FILE - A pumping unit sucks oil from the ground near Greensburg, Kansas.
The U.S. government has authorized limited crude oil exports to Europe, for the first time in years, raising new questions about how companies are testing the limits of a controversial, decades-old exports ban.
The Department of Commerce has granted two licenses to export U.S. crude to the UK since last year and another two to Italy, according to data Reuters obtained through a Freedom of Information Act request.
One application for German exports was filed in January and is awaiting a decision by the Bureau of Industry and Security (BIS), which is responsible for reviewing requests to export crude under a 1975 law that bans most shipments with a few exceptions, including sales to Canada and re-export of foreign oil.
These are the first permits for shipments to the UK since at least 2000 and the first to any European country since 2008, according to data from the BIS. The bureau has approved 120 licenses since January 2013, nearly 90 percent of which were for sales to Canada, the data show.
It was not immediately clear under which provisions BIS granted the European export licenses. The current regulation allows foreign crude to be re-exported from the United States if it is not commingled with U.S. crude, an option that some Canadian producers are said to be using.
In rare cases, the regulation permits the exchange of U.S. oil for foreign crude or refined products of higher value, which has become an attractive option with the growing surplus of light, sweet shale oil.
Whatever the case, the licenses could add to the growing debate in Washington on the benefits and pitfalls of lifting the ban, among the year's most urgent energy policy questions, as the relentless rise in shale oil production threatens to saturate domestic refiners as soon as this year.
They may add to expectations that the Obama administration will allow companies to use provisions in the existing regulation to slowly increase exports, while stalling on a decision on whether to scrap the ban.
With U.S. oil production at a 25-year high, many oil producers are eyeing other markets and have called for an end to the ban on exports, which they consider a relic of the 1970s, when the Arab oil embargo led to steep prices at the pump.
Alaskan Republican Lisa Murkowski, the Senate Energy and Natural Resource Committee's top Republican, has backed that position.
On the other side, independent U.S. refiners, which stand to benefit from cheaper domestic crude, have argued against easing restrictions.
Senator Ron Wyden, chairman of the Energy and Natural Resources Committee and a Democrat of Oregon, warned at a hearing last week that “a number of influential voices” that want to export oil could drown out the risks for the average consumer.
If more exports to Europe are allowed, refiners across the Atlantic may have cause to celebrate since access to cheap, high-quality U.S. shale oil would help revive their margins.
The BIS did not respond to frequent requests for information on the nature of the licenses. It declined to comment on the identity of the exporting companies, citing exceptions in the Export Administration Act.
The bureau's data does not show which permits were used, and the Department of Energy's oil export data does not show any crude shipments to Europe through November 2013.
European exports a rarity
Exports of crude to Canada were initially approved by President Ronald Reagan in the 1980s, and have picked up rapidly in recent years. The United States sent about 200,000 barrels of oil a day to Canada in November, the highest volume since 1999, data from the Department of Energy shows.
A handful of licenses have also been regularly approved over the past decade for countries in central America or Asia, either for the export of heavy California crude or the re-export of foreign-origin oil, according to a BIS statement released last year.
But European countries have rarely appeared on the list. Two permit applications filed in 2011 for exports to Switzerland and one for exports to the Netherlands were not approved.
The two approved UK permits were for shipments with a total maximum value of $1.8 billion, while those to Italy were valued at $3.12 billion. The application for German exports was worth $2.6 billion, the data show.
Theodore Kassinger, a partner with the law firm O'Melveny and Myers in Washington who previously served as the deputy secretary and general counsel of the Department of Commerce, said the bureau likely stuck to existing provisions to allow exports to Europe.
“The licenses were likely within the confines of the current law and so they may have involved re-exports of foreign-origin oil,” he said.
Without established trade routes or tanker rates, it is difficult to compare the economics of exporting Canadian heavy oil sands versus shipments of U.S. light-sweet oil to Europe. Few traders have examined the value of such unprecedented shipments.
While Canadian crude trades at deep discounts to the U.S. benchmark futures contract, most European refiners are not configured to process the heavy oil.
Ultra light, low-sulfur Bakken, on the other hand, would be welcome in Europe, but trades at relatively higher prices in the United States where local refiners are still eager to replace imported crude with the domestic grade.

Export expansion suggests oil swaps

Others said oil volume swaps - whereby companies can export U.S. light oil for a higher quality or volume of crude or refined fuels - may be behind the recent expansion in export licenses to Europe.
“The implication is that we are not exchanging a higher value item for a lower value,” said Ed Morse, global head of commodity research at Citi, while noting that re-exports of Canadian heavy oil from U.S. shores are on the rise.
Applicants for such licenses have to demonstrate that the trade is part of an overall transaction in the nation's interest and the oil cannot be sold for a reasonable price in the United States.
Sellers also have to prove that exports will be terminated if U.S. supplies are seriously threatened.
“I am skeptical that it was a swap because tests for such exports are very complicated,” Kassinger said, referring to sellers' onus to prove that they can't sell the oil at a profit within the country.
“But the time will not be very far when it will not be commercially viable to market the crude in the country,” he said.

You May Like

Video Americans, Tourists, Reflect on Meaning of Thanksgiving

VOA garnered opinions from several people soon after November 13 Paris attacks, which colored many of their thoughts

Video Thais Send Security Concerns Down the River

In northern Thailand, the annual tradition of constructing floating baskets to carry away the year’s bad spirits highlights the Loy Krathong festival

Video Tree Houses - A Branch of American Dream

Workshops aimed at teaching people how to build tree houses have become widely popular in America in recent years

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Islamic State Unfazed by Losses in Iraq, Syriai
November 26, 2015 5:21 AM
Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

Video Islamic State Unfazed by Losses in Iraq, Syria

Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

Video Taiwan Looks for Role in South China Sea Dispute

The Taiwanese government is one of several that claims territory in the hotly contested South China Sea, but Taipei has long been sidelined in the dispute, overshadowed by China. Now, as the Philippines challenges Beijing’s claims in an international court at The Hague, Taipei is looking to publicly assert its claims. VOA’s Bill Ide has more from Beijing.

Video Syrian Refugees in US Express Concern for Those Left Behind

Syrian immigrants in the United States are concerned about the negative tide of public opinion and the politicians who want to block a U.S. plan to accept 10,000 Syrian refugees. Zlatica Hoke reports many Americans are fighting to dispel suspicions linking refugees to terrorists.

Video After Paris Attacks, France Steps Up Fight Against IS

The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Americans Sharpen Focus on Terrorism

Washington will be quieter than usual this week due to the Thanksgiving holiday, even as Americans across the nation register heightened concerns over possible terrorist threats. VOA’s Michael Bowman reports new polling data from ABC News and the Washington Post newspaper show an electorate increasingly focused on security issues after the deadly Islamic State attacks in Paris.

Video World Leaders Head to Paris for Climate Deal

Heads of state from nearly 80 countries are heading to Paris (November 30-December 11) to craft a global climate change agreement. The new accord will replace the Kyoto Protocol on Climate Change that expired in 2012.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

Video Creating Physical Virtual Reality With Tiny Drones

As many computer gamers know, virtual reality is a three-dimensional picture, projected inside special googles. It can fool your brain into thinking the computer world is the real world. But If you try to touch it, it’s not there. Now Canadian researchers say it may be possible to create a physical virtual reality using tiny drones. VOA’s George Putic reports.

Video New American Indian Village Takes Visitors Back in Time

There is precious little opportunity to experience what life was like in the United States before its colonization by European settlers. Now, an American Indian village built in a park outside Washington is taking visitors back in time to experience the way of life of America's indigenous people. Carol Pearson narrates this report from VOA's June Soh.

Video Even With Hometown Liberated, Yazidi Refugees Fear Return

While the northern Iraqi town of Sinjar has been liberated from Islamic State forces, it's not clear whether Yazidi residents who fled the militants will now return home. VOA’s Mahmut Bozarslan talked with Yazidis, a religious and ethnic minority, at a Turkish refugee camp in Diyarbakır. Robert Raffaele narrates his report.

Video Nairobi Tailors Make Pope Francis’ Vestments

To ensure the pope is properly attired during his visit, the Kenya Conference of Catholic Bishops asked the Dolly Craft Sewing Project in the Nairobi slum of Kangemi to make the pope's vestments, the garments he will wear during the various ceremonies. Jill Craig reports.

Video Cross-Border Terrorism Puts Europe’s Passport-Free Travel in Doubt

The fallout from the Islamic State terror attacks in Paris has put the future of Europe’s passport-free travel area, known as the "Schengen Zone," in doubt. Several of the perpetrators were known to intelligence agencies, but were not intercepted. Henry Ridgwell reports from London European ministers are to hold an emergency meeting Friday in Brussels to look at ways of improving security.

Video El Niño Brings Unexpected Fish From Mexico to California

Fish in an unexpected spectrum of sizes, shapes and colors are moving north, through El Niño's warm currents from Mexican waters to the Pacific Ocean off California’s coast. El Nino is the periodic warming of the eastern and central Pacific Ocean. As Faiza Elmasry tells us, this phenomenon thrills scientists and gives anglers the chance of a once-in-a-lifetime big catch. Faith Lapidus narrates.

Video Terrorism in Many Forms Continues to Plague Africa

While the world's attention is on Paris in the wake of Friday night's deadly attacks, terrorism from various sides remains a looming threat in many African countries. Nigerian cities have been targeted this week by attacks many believe were staged by the violent Islamist group Boko Haram. In addition, residents in many regions are forced to flee their homes as they are terrorized by armed militias. Zlatica Hoke reports.

Video Study: Underage Marriage Rate Higher for Females in Pakistan

While attitudes about the societal role of females in Pakistan are evolving, research by child advocacy group Plan International suggests that underage marriage of girls remains a particularly big issue in the country. VOA’s Ayesha Tanzeem reports how such marriages leads to further social problems.

VOA Blogs

World Currencies


Rates may not be current.