Obama eases oil export ban with big swap deal with Mexico

In the latest move undercutting the longstanding ban on exporting U.S. crude oil, the Obama administration has approved a proposal that would trade American lighter sweet crude for heavier crude supplies from Mexico.

The license applications approved by the Commerce Department stop short of a direct sale of U.S. oil to a foreign buyer, but would allow for the exchange of similar amounts of U.S. and Mexican crude, under a deal first reported by the Reuters news agency. Mexico’s state-run Pemex oil company had asked for the right to acquire 100,000 barrels of American lighter, higher-quality crude oil from shale a day as its own production levels have fallen.

Although the department turned down other swap applications from Asia and Europe, the move is the latest weakening of the blanket ban on the export of U.S. crude oil first imposed at the height of the OPEC oil embargo in 1975.

Citing the revolution in U.S. production ushered in with the boom in fracking production, Republicans in Congress and the oil industry have increasingly lobbied the administration to allow U.S. producers to sell crude on the world market. The move is opposed by many Democrats and by environmental activists who fear it will lead to higher U.S. prices at the gas pump — a claim challenged by many economists — and encourage greater use of fossil fuels at the expense of cleaner, renewable energy sources.

The swaps are one of the few exemptions to the export ban included in the original legislation, but the Obama administration move signals a greater willingness to use the waiver in the future.

Reuters, citing administration officials, said the Pemex licenses will be issued at the end of the month and are good only for a year. U.S. refiners in the Southwest will obtain a new supply of Mexican heavy oil, which is a better fit for them than much of the lighter crude coming in from domestic sources.

Two Texas lawmakers — Democratic Rep. Henry Cuellar and Republican Rep. Will Hurd — praised the approval of the swap deal in a statement Friday, saying it directly benefit refiners in the state.

“These swaps will further positively impact energy exploration in Texas and the United States,” the lawmakers said. “The U.S. and Mexico have a great relationship when it comes to trade and commerce, and today’s announcement is a clear sign that both countries are eager to further develop their energy sectors.”