While the US is the world’s top oil producer, it’s also the world’s top gas producer.
Inflation, fueled by supply chain problems and Russia’s war in Ukraine has increased the cost of this precious resource. On top of that, Hurricane Ian forced foreign manufacturers in the US to scale back production.
Even the head of state oil company Saudi Aramco is concerned. Earlier this month, Mr issue a dire warning that prices could soon skyrocket due to Aramco’s “extremely low” capacity.
Which means Americans should prepare for a winter is very expensive.
But with President Biden preparing to release Another 25 million barrels of the country’s “oil piggy bank” to the market at the end of the year and diesel fuel supply is running at dangerously low levelsmany Americans might wonder why not just keep that supply to keep the lights on here?
At $60 or more for a barrel, it can be frustrating to see domestic oil leaving US ports faster than foreign oil arriving. But it’s been a decades-old challenge and only the nature of the crisis has changed.
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Leading from behind
The United States is the world’s top producer of oil (including crude oil, other petroleum liquids, and biofuels) and as of 2018. According to the US Energy Information Administration, it’s not even close. .
The EIA report says that as of 2021, the US produces 18.88 million barrels per day – about 10 million barrels per day more. 2 Saudi Arabia (10.84 million) and no. 3 Russia (10.78 million).
The EIA also notes that the US is the largest consumer of oil, using 20.54 million bpd, or 20% of global reserves, and far beyond zero. 2 China (14.01 million). According to the EIA report, the US imported 7.86 million barrels of oil per day last year.
So, if the US is producing as much oil as it imports, and interest in renewable energy is growing, it’s not that the US won’t be so dependent on foreign oil, and concerns about energy prices going down because US reserves will be more than enough?
Not with a long shot.
Oil prices and politics
The reasons for the difference in import and export are actually quite simple. Chief among them:
Foreign oil is cheaper: Mining costs are usually lower than in other countries.
Rystad Energy, a private energy research firm, found in a 2020 analysis that oil fields in the Middle East have the lowest production costs in the world at $31 per barrel. Oil production from US deepwater wells is at $43 per barrel, with fracking oil at $44 per barrel.
Energy as a weapon: Prices are often related to how countries consider the environmental, economic and geopolitical impacts of their oil.
Some concerns weigh more than others. For example, Russia is widely seen as using oil as a tool to gain concessions to its invasion of Ukraine.
The Russian invasion eventually led President Biden to sign a ban on Russian oil imports, but it’s not clear how much of a deterrent the ban deterred Vladimir Putin. Europe now faced with new uncertainty on Russia’s access to vital oil before winter.
Not all oils are created equal: This is a fundamental challenge for the United States, where much of the nation’s refining capacity is built to process heavy, hard-to-refinish crude imported from the Middle East and elsewhere. That U.S. capacity is not aimed at refining the light sweet crude that characterizes the outflows in Oklahoma, Texas and elsewhere.
Shifting US refining capacity to light crude could create amazing volatility in the market and jeopardize existing huge investments, the American Petroleum Institute said.
Efforts to correct that mismatch have almost always stalled, often due to environmental protests or other political realities. Most believe the current situation will not change until new refining capacity comes online or existing capacity is upgraded to handle what the US produces. The cost of such a change would be enormous.
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