The horizontal drilling and hydraulic fracturing techniques sparked a historic U.S. production
boom that lowered consumer prices, boosted the economy, and changed geopolitics. It made the
United States the world's largest oil producer a few years ago, but until recently, the United
States was still importing millions of barrels per day from other countries, particularly Russia.
The US Energy Information Administration (EIA) estimated that in 2020, America would produce 18.4
million barrels of oil per day and consume 18.12 million. Yet, according to the same research,
the US has been importing 7.86 million barrels of oil per day in recent years.
In 2021, the US exported 8.63 million barrels per day of petroleum
to 176 nations and four US territories. Crude oil exports accounted for 35 percent
of overall U.S. gross petroleum exports in 2021, with 2.98 million b/d(barrels per day). In 2021,
overall net petroleum imports (imports minus exports) were around -0.16 million b/d,
implying that the United States was a 0.16 million b/d net petroleum exporter. Canada,
Mexico, Russia, Saudi Arabia, and Colombia were the top five source countries for U.S.
gross petroleum imports in 2021. Why does the US still import
crude oil and refined products? And, while they are still importing oil,
why do they export domestic crude – especially when prices have risen at the pump?
Why don’t they just keep American oil at home? So, let’s explain it…
Although oil is a global commodity, hardly anyone directly consumes it.
It has to be refined into the fuels, feedstocks, materials, and goods we buy and consume every day.
This means that physical variables such as where oil is produced or where refining or
manufacturing factories are located, as well as the location of the largest customer demand, have
an impact on its utility and thus overall value. At the same time, different types of oil are
required to make different products, and despite the rapid increase in domestic oil production,
major sections of the oil produced in the United States may not be sufficient
to make all of the items that Americans use. This emphasizes the importance of flexibility
in international oil trading – marketing supplies to global customers that may not
meet local requirements – in unlocking the United States' productive potential.
For these and other reasons, keeping American oil at home and opting out
of the global petroleum market is neither possible nor in the country's best interests.
Let’s look at some of the factors as these might help you to have a clear understanding
of our discussion on why America needs to export crude and refined oil products…
1. Oil Location Geographically, oil production,
refining, and demand may differ. Because much of the infrastructure needed to produce,
refine, and transport fuels is located in the mid-continent and the US Gulf Coast regions,
the United States continues to import crude oil and finished products.
Many states with significant motor fuel demand, on the other hand, lack such infrastructure and
rely on shipping, rail, and trucks to get their fuel. Florida, Oregon, and New England are great
examples of states that rely largely on more expensive modes of transportation and imports.
2. Quality Along the Gulf Coast,
700 million barrels of oil are kept in deep salt caverns.
That's nearly a month's worth of food for the entire country. President Joe
Biden has already authorized the discharge of oil from that reserve on two occasions,
but it has had little impact in the long run. Russia is one of the world's top oil exporters,
although it only accounts for roughly 8% of US oil imports. Russian oil makes up roughly
3.36 percent of the 20 million barrels of oil used by the United States each day.
However, that 8% is still significant in its own way. Many refineries in the United States
were actually built before the domestic oil boom that made America the world's largest producer.
The majority of the oil produced in the United States today is lighter, sweeter crude,
which flows faster and has lower Sulphur levels than many other sorts.
The problem is that many refineries in the United States were built decades ago,
and were designed for the heavier, sulfur-rich crudes that were typical at the time.
Most of the refineries in the United States are more economically efficient when using
heavy sour crudes sourced from other countries. When oil prices rise, the United States cannot
simply pump more crude to lower them. Drilling is the only option to dramatically increase
production. After years of boom-and-bust cycles, followed by demand drops during the coronavirus
epidemic, oil corporations have been both reluctant to invest money and short on employees.
Thus, importing crude oil and refined products may sound more feasible in this scenario.
3. Policies When oil prices rise
dramatically around the world, big oil-producing countries like Saudi Arabia and the United Arab
Emirates are able to protect their citizens. They keep some spare capacity, or oil-pumping
capability that can be turned on and off within six months, for geological and political reasons.
They regard fossil-fuel production as a national security issue, and they control it accordingly.
However, when it comes to fossil resources, the United States does not follow this strategy.
The federal government makes no claim to oil or gas under private property.
It lacks the ability to immediately enhance or limit drilling through legislation.
When America genuinely dominated the global oil sector in the early half of the twentieth century,
one government in the United States was able to determine worldwide pricing in the
same way that the Gulf Plus cartel does today. Surprisingly, this occurred at the state level.
The Texas Railroad Commission is in charge of opening and closing the state's powerful taps.
The commission's ability to set prices has dwindled as Texas' easy-to-reach resources
have dried up. Modern horizontal fracking wells, which take six to eight months to produce their
first drop of oil, now supply Texas oil. That means that, in the current state of the
US oil industry, there is no way to ramp up new oil output in a matter of weeks or even months.
4. Refining is a Complex Process The refining system in the United States operates
24 hours a day, 365 days a year to generate the fuels and goods that Americans consume on a daily
basis. But, since refining is a complex process, Saudi Arabia who has been a reliable crude oil
supplier to US refiners for decades, will continue to export the crude oil as well as refined
products to the US market, even in the future. 5. Decisions in the US Oil Market
Well, this one can be the most important factor… Unlike in some other countries,
where government-controlled national oil firms dominate oil production,
refining, trade, and marketing, the United States has a diverse range of privately owned companies
doing these services. The scale and nature of the US oil trade, as well as its change over time,
are the consequence of several decisions made by a diverse group of US oil firms in response
to domestic and global market possibilities and needs. Although these firms are subject to
state and federal rules in the United States, and their decisions are influenced by them,
there is no centralized control or direction of oil imports and exports in the country.
Now… Let’s have a look on how Democratic
and Republican energy policies have affected the import and export of crude oil in U.S.
President Donald Trump announced the United States' withdrawal from the Paris Agreement
in 2017, citing a desire to increase domestic oil production and attain energy independence.
Four million acres of federal land were leased to fossil fuel firms during his term.
Trump also resurrected the Keystone XL pipeline, which has bipartisan support in Congress.
Then, in 2020, the world was jolted by the advent of COVID-19,
a new coronavirus disease that quickly spread throughout the globe. Oil demand fell sharply
as a result of the response measures, which included stay-at-home orders. Due to low demand,
US oil output fell again during the pandemic. Things changed drastically again when President
Joe Biden was elected in 2021, promising to take bold action on climate change.
He re-entered the Paris Agreement, committing to reduce US emissions by at least half from 2005
levels by 2030 and to attain net-zero emissions by 2050. Biden proposed, among other things, a return
to stricter fuel economy standards for cars and trucks, as well as policies to encourage the use
of electric vehicles. Biden canceled the Keystone XL pipeline and put drilling leases in the Arctic
National Wildlife Refuge on hold. Drilling permits for other federal lands, on the other hand,
are being granted at an unprecedented rate. As the pandemic in the United States fades,
demand for oil picks up, and gas prices soar to a seven-year high.
Now, let's have a look at the current state of the US oil market.
The invasion of Ukraine by Russia has wreaked havoc on global energy prices.
Biden halted shipments of Russian oil into the United States,
and Western sanctions forced energy businesses to leave the country. Oil prices, which had
been climbing in the aftermath of the pandemic, have now reached their highest point since 2008.
The U.S. legislators on both sides of the aisle are calling for increased domestic oil production
in reaction to near-record gasoline prices, yet others in Congress are pushing for a faster
transition to renewable energy. The United States and other International Energy Agency
members have also announced plans to release sixty million barrels of oil from strategic reserves.
Meanwhile, the Biden administration is considering mending harsh ties with Iran,
Saudi Arabia, and Venezuela in the hopes of increasing oil supplies. For the first
time since 2019, senior US officials visited Caracas, as the Biden administration worked
to complete discussions on renewing the 2015 Iran nuclear deal and removing US sanctions on Tehran.
As a result, the latest war situation has added to the uncertainty that has
gripped the world's energy markets. So, what are your views on this?
Can the US increase oil fast enough to offset Russian imports? Or would the U.S
be able to combat huge oil price hike which is expected in near days?
Do share your answers in the comment section below.
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