Americas News
Traders Shipping More U.S. Oil to Canada
Oil traders are moving increasing amounts of U.S. crude oil from Texas to Canada, undercutting U.S. East Coast refiners who are legally required to use more expensive U.S. vessels to move oil to their locations, Reuters reports.
Tanker brokers say at least seven of the shipments have already been booked on the spot market this year, up from less than six altogether in 2012.
The firms, including commodities company Trafigura and Australian bank Macquarie, have hired foreign-flagged tankers to move U.S. shale oil to Canada, while U.S. refiners must hire U.S.-owned and operated ships under a law known as the Jones Act.
The cost for a Jones Act compliant voyage from the Gulf Coast to the East Coast is about $70,000 per day, compared with $16,000 per day for a foreign-flagged ship sailing to Newfoundland.
The U.S. Commerce Department generally provides traders permits to sell crude to Canada so that it can be refined and sent back to the U.S. as fuel, which means the East Coast refiners are competing with the Canadian gasoline or diesel.
"Here's a federal law that basically rewards your foreign competitors - that's how the refiners look at it," said John Auers, senior vice president of refinery consultants Turner, Mason & Co.
U.S. shale oil production has ramped up thanks to the development of shale reserves, and, if more discoveries are found and technology improves, could help the country become a net exporter within 25 years.
