NEW YORK (Real Money) -- The recent ruling by the Commerce Department, which allows Pioneer Natural Resources (PXD) and Enterprise Product Partners (EPD) to export light "condensates," puts an effective end to the export ban. It will have multiple effects on the exploration-and-production companies working in the Permian, Eagle Ford and Bakken shale plays, as well as on domestic refiners. But, even more important, it represents another stupid U.S. energy policy decision that is blind to long-term U.S. energy needs and does nothing except increase the profit of a few domestic E&P players.
Many analysts have discounted this decision to allow very marginally distilled crude oil to be considered a "refined" product and for its export to be allowed. But this is a giant crack opening up in an export ban that has been in place since the 1970s and has kept domestic crude at home. Pioneer CEO Scott Sheffield has been lobbying for an end to the ban, as has Harold Hamm of Continental Resources (CLR), and now they have the workaround they need to avoid a Congressional battle.
The Commerce Department will soon be flooded with similar requests for condensate workarounds -- from Continental, Cimarex (XEC), EOG Resources (EOG) and several other lesser players. All of these firms will now be able to recapture the margin discount between domestic and global crude and the current discounts on Permian and Bakken oil.
Shares of refiners with Gulf Coast operations, such as Valero (VLO), got pummeled on Wednesday. That's no fluke. The margin advantage that they've enjoyed, which has allowed them to mint money over the last three years, is about to disappear. I wouldn't own any refining stock until the market gets a better sense of just how deep this export workaround will go.