U.S. Petroleum Imports Could Fall To Zero In 2020
In 2006, following 35 years
of declining U.S. oil production, net monthly imports of crude oil and finished
products had climbed to more than 13 million barrels per day (BPD).
What’s happened since is
nothing short of amazing. Last week, the Energy Information Administration
(EIA) reported that U.S. crude oil production had reached 10.38 million
BPD. This represents an increase of more than 1.2 million BPD in the past year
and is more than 5 million BPD higher than March 2006 production levels.
U.S. crude oil demand has
fluctuated a bit in recent years but presently stands at just over 20 million
BPD, which is about the same level as in 2006.
Given the 10 million BPD
difference between U.S. oil demand and U.S. oil production, one might think
that the U.S. is still dependent on foreign countries for 50% of our crude oil.
But it’s more complicated than that.
U.S. refineries have
invested billions of dollars into equipment to process heavy, sour (i.e.,
contains sulfur compounds) crudes. Most of the new oil production in the U.S.
is light and sweet, which isn’t as economically attractive for refiners who
have invested in equipment to process the lower grades (which are much
cheaper).
Thus, U.S. oil producers
have been exporting an increasing amount of oil, while U.S. refiners import the
cheaper heavy grades. In just the past four years, U.S. crude oil exports have
jumped from nearly nothing to more than 1.5 million BPD:
But the U.S. also exports
finished products like gasoline and diesel. In fact, a growing fraction of the
oil being consumed in the U.S. is simply being refined and exported. In 2011,
the U.S. became a net exporter of finished products (e.g., diesel, gasoline,
etc.) for the first time since 1949. Finished product exports have continued to
grow since:
When all the factors are
considered, the impact of growing U.S. oil production becomes clear. The
overall balance between U.S. imports and exports of both crude oil and finished
products fell to 2.6 million BPD in December. That is the lowest level since
the EIA began tracking this category in 1973:
Last fall the International
Energy Agency declared in its World Energy Outlook 2017 that the U.S. could be
a net exporter of oil within a decade. On the current trajectory, net imports
could indeed turn into net exports in 2020.
Incidentally, 2020 is also
the last year that the IEA projects that supply growth will
keep up with demand growth given the present level of global investments. I
will address that possibility in the next column.
Comments
Producing 100% of the
oil we use in the US will cut our trade deficit by billions. Exporting our
excess oil will further reduce our trade deficit in proportion to global oil
demand.
Norb Leahy, Dunwoody
GA Tea Party Leader
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