Opec's monopoly under threat

The recent decision of the US government, to allow export of what is being referred to as "condensates", has all the ingredients of a "game changer" in the international oil market. The permission was given to Pioneer Natural Resources Co and Enterprise Products Partners to ship a type of ultralight oil, better known as 'condensates,' which could be refined into gas or other fuels. Although crude oil still remains banned from export, "condensate", after the present ruling, can qualify as a refined product - and hence exportable - as long as the liquid is stabilised and distilled. However, it needs to be pointed out that this would be a kind of indirect way to export oil and oil products as the 1970s-era policy restricting crude oil exports is still in vogue. Congress is not expected to lift the ban, at least before November elections because the lawmakers do not want to be blamed for a move that could increase oil prices in the domestic market.
Washington, it may be noted, had been edging towards reversing the crude oil export ban for some time. The US Bureau of Industry and Security (BIS) has already determined that condensates minimally processed by cheaper units known as stabilisers, which strip out volatile hydrocarbons to ensure safe transport in pipelines, may be freely exported. The US is believed to be awash in light oil from shale formations, including the ultralight oil, often termed as condensates. In two years' time, from 2011 to 2013, the US oil output soared by 1.8 billion barrels per day, with 96 percent of new production in the form of light or ultralight oil. As a consequence of the new ruling, shipment of condensates could begin as soon as August this year and according to certain estimates, the US could export some 200,000 to 300,000 barrels of condensates by the end of the current year and the volume could double by 2015.
It may be mentioned that, despite stiff domestic opposition, the US was already heading towards a more open crude oil export regime. The present decision could open the floodgates of exports and force the Congress to rethink the policy on restricting crude oil exports in the near future. The argument that allowing the export of the US crude to outside world might cause prices to jump at the local gas stations and hurt the consumers is no more tenable after the use of new technology of converting condensates into crude oil and the consequent sharp increase in oil output. In fact, the decision to lift restrictions on the US crude exports is now expected to boost the US production, lower gasoline prices and support as many as one million additional jobs. One credible study has also estimated a cut in the US oil import bill by an average of dollar 67 billion per year as a result of boost in the US oil production.
Needless to add, that the landmark decision would carry significant impact on the global energy markets and on individual economies. Obviously, such a change owes its origins to the application of new technology to squeeze oil from a new source and would, therefore, boost output and greatly undermine the monopoly of Opec to manipulate the world crude market. The day may not be far off when higher supplies from the new source would push down the oil prices in the international market, reduce the export income of oil exporting countries and prove a boon for the oil importing countries. All of this would have multiplicity of effects on various economies. In fact, it could be the opening of a new economic era for many countries. Although it is too early to count the birds in the bushes, yet it could easily be surmised that Pakistan would be a great beneficiary of the new development because of its near dependence on imported oil and the general belief that the country has significant quantity of shale formations, which could yield substantial amount of crude oil for a long period of time. After all, it was only about six decades back that most of the oil exporting countries now almost over the moon had a hard time in feeding their populations and managing a reasonable standard of living for their citizens.