Dirty deal: U.S. lifts crude oil export ban

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According to the Wall Street Journal which broke the story on Wednesday morning, Pioneer Natural Resources ( PXD ) and Enterprise Products Partners ( EPD ) have been given the go ahead to begin exporting a form of crude oil called condensate, and both companies have since confirmed the story. According to the WSJ, "The Obama administration cleared the way for the first exports of unrefined American oil in nearly four decades, allowing energy companies to start chipping away at the longtime ban on selling U.S. oil abroad."

These companies are among many who have asked the Obama administration to loosen export restrictions, including big oil companies, the most vocal among these being Exxon ( XOM ). Because this oil is, in effect, co-produced with natural gas when shale resources are exploited, the ability to export it will give the affected companies a means of raising revenue without adding a great deal to their expenses.

Exxon, in particular, wants to appease shareholders who are growing discontent due to company's recent revenue and production declines. The company tried for years to raise its production by spending more on exploration, but the tactic didn't work, and as a result, Exxon is cutting its drilling budget . Exxon's action points, perhaps more clearly than any other single fact, to the reality of increasing oil scarcity in the foreseeable future.

Now here's a fun fact; as anyone who has watched the company carefully knows, Exxon has pushed harder and harder for a lifting of the export ban as its production has fallen. What does all this add up to? Only this: that the U.S. is allowing oil exports due to the inability of the biggest oil companies to find enough oil-or, rather, due to the political pressure brought to bear by the oil companies in response to that inability.

It is hard to believe than any reasonable person, viewing the issue with fresh and objective eyes, could conclude that it makes sense to increase the exportation of a resource in response to a looming scarcity of that resource. The response is, in fact, the exact opposite of the rational one, which is increased oil conservation. This response could have appeared nowhere else but in the funhouse mirror created by the clash/collusion of business and politics, and even then, only when driven by short term need.

Perhaps that is why the Obama Administration chose to change America's 40-year-old energy security policy by privately informing the companies involved, rather than publicly explaining the decision to the American people. 

Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC .


This article was originally published on MarketIntelligeneCenter.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , commodities

Referenced Stocks: PXD , EPD , XOM

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