Canola and Quinoa

Wow, I love to blog. This is an incredible story.

When I started blogging back in 2007, I knew almost nothing about the oil and gas industry.

I remember all the grief I used to get from folks telling me I did not know canola from quinoa. Which was true.

I remember blogging that at some point in the distant future, remember this was back in the 2007 - 2009 time frame, the US might be in the position to export oil. I was immediately beat over the head by folks telling me that there the US did not allow oil to be exported. I checked the CIA Factbook and, in fact, the US did export some oil every year, and, actually, significant amounts. I blogged that the law banning US oil exports is so full of loopholes, the oil and gas industry will find ways to export oil.

So, today here it is. Vindication! Whoohaa! I do know canola from quinoa.

RBN Energy is reporting:

Could the US end up exporting 700 MMb/d of crude to Canada by the end of the decade? Despite static domestic refinery demand and a growing production surplus, Canadian imports of crude increased this year. How could that be? The reason for this apparent anomaly is that East Coast Canadian producers are getting better prices exporting their crude anywhere but the US rather than competing at home against cheaper imports from South Texas and North Dakota. Today we explain some unintended consequences of the US crude export regulations.

This is a complex explanation so hold on to your hats as we walk through what is actually happening today and could increase dramatically in the future – the import of cheap US crude into Canada to replace similar grades produced locally that are being exported elsewhere for higher prices. Our story starts - with government regulation in the shape of the US crude oil export rules.

We have previously detailed these rules administered by the Bureau of Industry and Security that dictate US produced crude and/or lease condensate cannot be exported (see Fifty Shades Lighter the Lease Condensate Export Problem). The export ban applies to all countries except for Canada and to all US crudes except for limited quantities of California and Alaskan production. One consequence of the ban would seem to be somewhat lower prices for some US light crudes. That is because US refineries are not configured to handle the preponderance of light crude from greatly expanded domestic shale production, so supplies are beginning to outstrip refinery demand. That in turn is causing US crude prices to move below overseas levels, in part because the surplus cannot be exported to compete in international markets.

I'm sure Harry Reid is already looking into this.

Speaking of which, I don't know about you, but does anyone find this strange that the law of the land is ObamaCare and Harry Reid can simply exempt his staff from complying?

It's one thing for the president to pick and choose which laws and which parts of laws to enforce, but once federal senators and Congress-people start doing it, it seems it moves to a different level. I just find that strange how a senator can simply exempt his staff from following the law. I didn't read the details, and perhaps the law allows wide discretion. I will know more when Nancy Pelosi exempts the entire state of California from participating.