Mexico Receives License to Import U.S. Oil

First Approval Outside of Canada in 40 Years

While debate continues in the U.S. about whether to allow oil companies to export their wares overseas, a deal has been struck with Mexico for an oil exchange. The Mexican state-owned oil company Petroleos Mexicanos, or Pemex, has received a license to import up to 75,000 barrels of light American crude per day in exchange for heavier crude from Mexico. While its original plan was to import 100,000 barrels per day, the revised, year-long license still represents a striking change in U.S. oil policy. It represents the first time in over 40 years that the American government has allowed large scale exports of domestic oil products.

Potential for Enormous Overall Exports

While the license granted to Pemex is less than originally anticipated, it still has the potential for impressive export numbers. A director at Pemex’s corporate partnership and new business department has reported that up to 27 million barrels of American light crude could be processed over the year in refineries across Mexico. The deal specifies that the crude must be refined at home and not re-exported. At the same time, the U.S. would receive heavy Mayan crude. American domestic refiners are especially well-equipped to accommodate this type of oil, making for an efficient, mutually beneficial trade.

Fortuitous Timing

The deal comes at an excellent time for both parties. Pemex has been having a particularly hard time coping with the worldwide decline in oil prices. The low price of oil combined with the depreciating value of the peso against the U.S. dollar have resulted in a loss of 167.6 billion pesos ($9.9 billion USD) in the third quarter of 2015 alone. The trade deal can help Pemex generate revenue by increasing the output of gasoline and diesel, among other benefits. The deal also poses an opportunity to help move the vast stores of U.S. oil that have resulted from a dramatic increase in domestic crude production, which has increased from 5.3 million barrels per day in 2009 to 8.7 million today.

Benefits for a Host of Companies

Opening up new markets is seen by most as being highly beneficial to the domestic oil industry. In addition to refining imported oil from Mexico, many wells throughout America’s shale formations still contain a wealth of untapped crude, waiting for markets to open up for increased sales and oil production. Fluid control products from Southwest are essential at multiple stages of the drilling and refining products, providing the highest levels of quality with the industry’s most competitive prices and lead times. The initial trade deal with Mexico begins in November and is set to last one year, but support for lifting the oil export ban continues to grow. As the market continues to develop, the experts at Southwest will be there. Contact us today to learn how our products can serve applications ranging from drilling to refining and beyond.

Natural Gas Prices: Implications and Trends

Another Impact of the Shale Boom

The oil boom that resulted from innovative drilling technologies in U.S. shale continues to have a broad impact on the energy market. Oil prices remain well under $50 a barrel, and the vast reserves of fossil fuels from shale regions go beyond just oil; the natural gas Oil drilling rigmarket is feeling the effects as well. Natural gas has been heavily extracted from shale rock, and the abundance of current supplies is causing some of the lowest costs seen in recent memory. Prices have recently fallen to $2 per million British thermal units, and continuing high levels of production are threatening to keep them low. In fact, the U.S. Energy Information Administration has predicted that production levels will continue to climb due to advances in technology, possibly reaching all-time record levels by next year. Yet, in spite of predictions such as these, there are many conflicting opinions about the future of natural gas prices.

An Atmosphere of Uncertainty

As winter approaches, the cost of natural gas has traditionally taken a spike in anticipation of its demand for heating. This year, things have been different, as El Nino has contributed to predictions of a warmer-than-average winter for much of the United States. These estimates have put a damper on traditional wintertime price upticks, but even so, natural gas prices remain unpredictable. Earlier this year, writers for Forbes were speculating that prices might be bottoming out and poised for a comeback. Just last week, natural gas prices made their biggest one-day gain in months. But with natural gas storage reaching record levels, many experts argue that the effect of demand from heating applications will almost certainly play the biggest role in short term prices.

Long Term Trends: Room for Optimism?

While high levels of production and the fickle weather continue to help determine short term prices, many experts are broadening their view to explore what the long term future of natural gas prices may be. Natural gas remains an abundant, reliable, and inexpensive source of energy, and there are reasons to believe that long term demand for it will increase. An article on the U.S. News website makes a compelling argument for the continued relevance and possible future investment opportunities associated with natural gas.

The primary reason to be optimistic is the continued and increasing demand for the product. The demand for natural gas from the U.S. is expected to increase by up to 20% by 2020, with markets such as Europe and Asia relying heavily on imports for their supplies. With our current ample storage and political stability, the U.S. holds important cost and reliability advantages in shipping natural gas. It is also possible that natural gas will someday replace coal as an overall energy source. Coal remains heavily used throughout the world, but its association with carbon emissions is causing a decrease in use. In the U.S., for instance, coal has dropped from making up 44% of domestic power plant fuel to just 30% since 2010, while natural gas has increased from 22% to 31%. Cleaner-burning CNG and LNG are among the most likely candidates for replacing coal. While these changes won’t occur overnight, there’s no denying that the abundance of natural gas can fill important energy needs, both at home and abroad.

A Continuing, Reliable Source for Natural Gas Supplies

At Southwest Controls, we supply a full variety of natural gas clients with the most reliable supplies in the industry. Whether customers need gauges, valves, tubing, hoses, or other important products, they can rely on us for premium quality and value. We have served energy clients since our inception in 2002, and will continue to do so throughout the many trends and fluctuations seen by the natural gas and oil industries. To find out more about our services, please contact us directly.