History of US Crude Exports and Destinations
Given the provisions of the Short Supply Controls, it is now easier to view Figure 4, which shows the history of US crude exports by destination. In the 1990s, crude was often exported to the US Virgin Islands from Alaska. Alaskan crude production waned, however, as did refinery activity in the Virgin Islands. In the later 1990s and early 2000s, Alaskan crude from Cook Inlet was often exported to Asia, where oil demand was surging. This activity also dwindled. The only major outlet remaining was Canada, with whom the US has a free trade agreement, and with whom crude swaps are common. Exports to Canada remained very small, however, until the shale oil boom began in earnest in the mid 2000s. The main growth in recent years has been trade with Canada. US crude exports to Canada soared from 9 kbpd in 2002 to 324 kbpd in 2014.
In the opposite direction, however, Canadian crude exports to the US grew from 1616 kbpd in 2004 to 2882 kbpd in 2014. Canada is the main source of foreign crude to the US. Canada and the US are close allies, and the majority of Canada’s production is in landlocked Alberta Province. The US is the most logical export market, and Canada would have to be regarded as a very secure source of supply. In the year 2000, Canada accounted for 15% of US foreign crude imports. In 2014, Canada’s share had grown to 39%. The share of Persian Gulf crudes was 27% in 2000 and 25% in 2014. African crudes suffered the greatest drop in market share, falling from 15% in 2000 to a mere 4% in 2014. This is explained largely by the quality of the crudes—Africa is known for high quality, light sweet crudes, and the influx of new crudes from shale plays compete more closely with this type of crude than with heavy sours from the Persian Gulf and many Western Hemisphere sources. Indeed, the US is preparing to expand crude trade with Mexico where light tight oils can be exchanged for Mexican heavy sours, since the light, low sulfur crudes will help Mexican refineries reduce fuel sulfur levels, and the US refining system is at a point where light crudes are starting to bottleneck towers, and cracking units require more vacuum gasoil feedstock.
The Changing Balance: US Crude Production, Imports and Exports
Imagine a young driver, say twenty years old in 1974, experiencing the Arab Oil Embargo and having to wait in line to buy gasoline. Forty years have passed, and that driver is now sixty and has seen the world change enormously. Some changes have been for the good, others not so good, and some are complex enough that they are impossible to judge. Definitions and calculations of “supply security” and “energy independence” vary, but Figure 5 clarifies the longer-term trends by comparing crude production with crude imports and crude exports from 1970 through 2014. Several points stand out.
First, US imports of foreign crude had been soaring before the oil price shocks of the 1970s. They collapsed in the early 1980s in response to high prices and the severe recession in the US. Oil prices then collapsed in 1986, and US imports began to climb again. Crude imports now have been falling since 2005.
Second, US crude production had been on a downward path in the 1970s, but the price spike did not cause a large resurgence of production. US production grew modestly until the price collapse in 1986, and from that point, it began to fall. Prices began to strengthen in the post-2000 years, and advances began to be made in hydro fracking. US production has grown since 2008. In fact, crude production recently surpassed crude imports, and this is the first time this has happened since 1993.
Third, US crude exports have been a steady feature in the overall balance, but at a very low level. The Export Administration Act was passed in 1979, and it did not eliminate exports, but perhaps capped them at a level consistent with the export conditions summarized above. But in recent years, exports have grown visibly.
Thus, we can see that we import less foreign crude, and of that, a greater share comes from Canada—a close ally and a stable source of supply. We produce more oil, and our demand has been falling as well. Given this, we can conclude that we are indeed more secure in our oil supply today. But it is not at all clear that the restrictions on exporting US crude had anything to do with it.
Is oil supply independence possible? Technologically and scientifically, yes, it would be possible for the US to be 100% self-sufficient in oil supply. On one side, the US could increase supply. On the other side, the US could cut demand. Technologically, each refinery could be converted into a combined refinery-petrochemical plant capable of matching demand exactly, and pipelines could be built to interconnect everyone, so that no trade was required with the outside world. But at what cost?
Oil is a global market, and essentially every consuming country engages in some sort of trade, even if it is just balancing trade, such as exporting 20 kbpd of gasoline to the south while importing 20 kbpd from the north.
