The U.S. announced Tuesday that it would allow the export of domestically produced condensate oil, relaxing a 40-year old ban on oil exports, adding to fears that oil prices will dive deeper amid a supply glut.
The U.S. Department of Commerce's Bureau of Industry and Security has agreed to grant export licenses for companies who wish to export condensate light shale oil from the U.S. to overseas.
'Lease condensate, including lease condensate produced from tar sands, gilsonite, and oil shale, is defined as crude oil,' said the U.S. agency Tuesday on its website.
However, 'lease condensate that has been processed through a crude oil distillation tower is not crude oil but a petroleum product,' it added.
In early November, BHP Billiton, an Australian mining and petroleum company, announced that it would export light oil from the U.S. without the authorization of the government, by classifying the export as condensate, and not as crude oil.
In addition, the U.S. Department of Commerce, who authorizes licenses for crude oil exports, allowed Pioneer Natural Resources and Enterprise Products Partners to export condensate oil to overseas.
The U.S.' 40-year-old self-imposed ban against exporting crude oil came into play during the 1970s after the Arab oil embargo forced the oil-dependent U.S. economy to face soaring oil and gasoline prices, which in turn forced the country to look for ways to boost its own resources.
The U.S. has enjoyed an increased domestic oil production since 2008 with its shale revolution, while significantly reducing its dependency on crude oil imports.
- Oil price slump and market share conflict
The decision of the U.S. department comes at a time when the price of oil has been falling sharply in the last six months.
The lifting of the ban could heat up the oil price war, and pose a serious obstacle against Saudi Arabia's aspirations to gain global dominance in oil markets.
The price of global benchmark Brent crude oil has been in steep decline since June, falling from $115 per barrel to $55 mark on Dec. 30, the lowest point in the last five and a half years, and the fastest fall since 2008.
The Organization of the Petroleum Exporting Countries, OPEC, announced on Nov. 27 that they would maintain producing 30 million barrels of oil per day until June, and would not cut production to stop the price fall.
The world's largest crude oil exporter, Saudi Arabia, has signaled on many occasions that it has lowered the official sale price of crude oil to Asia and the U.S., in order to preserve its market share and compete with the booming domestic oil production in the U.S.
Ali al-Naimi, oil minister of Saudi Arabia and United Arab Emirates Energy Minister Suhail Al Mazrouei claimed on Dec. 21 that the glut of oil supply in world markets and low oil prices were caused by non-OPEC producers.
While Saudi Arabia and Gulf countries can resist falling oil prices more than other producers because of their relatively lower break-even prices, producing nations, like Russia, whose revenues are dependent on oil exports are struggling to survive in the market.
Russian Deputy Prime Minister Arkady Dvorkovich announced on Dec. 25 that Russia may cut its oil production in 2015 due to low oil prices and lack of investment in its domestic energy sector.
The country also considers using ruble, its own currency, for energy deals with other countries, in order to alleviate its stumbling economy, said Russia’s Deputy Foreign Minister Vasily Nebenzya on Dec. 31.
By Ovunc Kutlu
Anadolu Agency
ovunc.kutlu@aa.com.tr