The U.S. Still Imports A Lot Of Oil
The goal of the U.S. “Energy Independence” continues to be pushed across the spectrum. It rests on lowering oil imports, seen as a bugaboo for us since the crisis of the 1970s. And on the surface, this makes sense. In the shale-era since 2008, U.S. crude oil production has exploded 160% to over 13 million b/d. Our domestic demand, meanwhile, has remained buoyantly very high but still flat, at 19-21 million b/d. U.S. oil imports have therefore fallen (Figure 1).
But as also seen, oil imports have not plummeted as one would assume in the ongoing shale-era. Due to slowly changing factors such as regional oil trade patterns, existing infrastructure, regional balances of supply and demand, and other constraints, the U.S. in 2019 still imported 9.1 million b/d, 6.8 million b/d of which was crude oil.
The good news though is that imports from a friend and neighbor Canada have displaced imports from obviously more politically risky OPEC. Since 2008, monthly crude imports from Canada have ballooned from 76 million to 134 million in 2019. Meanwhile, “The U.S. Oil Boom Is Sinking OPEC Imports.”
Further, the U.S. oil refinery system is configured to process the heavier crude grades that have been historically been imported from Canada, Mexico, and Venezuela. For all its strengths, our shale oil revolution has mostly yielded a lighter, sweeter oil crude that is not a direct match for our refining system.
Thus, with overflowing domestic shale oil, the emerging U.S. oil market has quickly become exports. A rule change in 2015 allowed us to export crude beyond just Canada. We exported nearly 3 million b/d in 2019, up from basically nothing just a few years ago (Figure 2). These exports have been essential in giving the U.S. shale industry more outlets to grow.
In fact, it is this rising export complex that explains why we must be careful about publicly touting dreams of “Energy Independence.” Oil really is the ultimate “global commodity,” where being “independent” of the market is just an illusion. This will remain especially true for the U.S. because it is on pace to become the largest crude exporter within five years.
Yet to be fair, we are “independent” in the sense that we recently became a net oil exporter for the first time in 75 years. According to the U.S. Department of Energy, the latest data (November 2019) has the U.S. exporting around 750,000 b/d more than it imported, which was the third consecutive month as a net exporter. For crude, however, imports averaged 5.8 million b/d in November, versus 3.0 million b/d for exports. Only the U.S. Gulf Coast regions exports more crude oil than it imports.
Ultimately, as we build our oil export complex and seek buying partners around the world, improving “self-sufficiency,” enhancing “Energy Security,” and/or unleashing “Energy Dominance” are all wiser chants than the politically catchy ”Energy Independence.”
But in any event, re-establishing China as a trade partner will remain critical. In the Fall, China’s total imports were up 17% y-0-y to a staggering 10.8 million b/d, even amid slower economic growth. China now plans to cut its 5% tariff on U.S. crude oil to 2.5%. That is really good news: exports from the U.S. to China stood at just 62,000 b/d in November, as compared to the yearly average of 231,000 b/d in 2018.