Why do we still need to buy crude oil and get help from nations like Saudi Arabia if the US is the biggest oil producer in the world?
Why do we still need to buy crude oil and get help from countries like Saudi Arabia if the United States is the biggest oil producer in the world?
Gas-filling expenses cause one of the largest economic shocks in American history, and high oil prices and energy concerns rock the global economy.
Unfortunately for American drivers, this is commonplace in a country that ranks among the top importers of oil while being the world leader in oil production.
In the midst of the busy summer travel season, gas prices have started to drop, which provides some comfort. But the national average for those prices is $4.40 a gallon.
President Biden’s failure to persuade Saudi Arabia to increase production and the controversial decision to move 5 million barrels of reserves to Europe and Asia have highlighted the frustrating dichotomy of export status/ import of oil from America.
It can be discouraging to see US oil leaving US ports faster than foreign oil is being imported, especially when a tank costs $75 or more.
The only thing that has changed about this problem over the years is the nature of the situation.
Driving from behind
As of 2018, the United States has been the world’s largest producer of petroleum (including crude, other petroleum liquids, and biofuels). It’s not even close, according to the US Energy Information Agency.
According to the EIA, as of 2021, the United States produced 18.88 million barrels per day, nearly 10 million more than second-place Saudi Arabia and third-place Russia (10.78 million). ).
The EIA also indicates that the United States is the world’s largest user of oil, consuming 20.54 million barrels per day, or 20% of available supply, far surpassing China, which ranks second (14, 01 million). According to EIA statistics, the United States imported 7.86 million barrels of oil every day in 2017.
Therefore, it should be true that the United States would not be so dependent on foreign oil and that concerns about energy prices should subside as American inventories would be more than sufficient if America produced almost as much of fat that it imported and that interest in renewable energies was growing.
Crude Oil Policy and Pricing
The causes of the import/export disparity are relatively simple. Among them, the main ones are:
Foreign oil is cheaper: Other countries often have lower extraction costs.
According to a 2020 analysis by Rystad Energy, a private energy research company, Middle Eastern oil reserves have the lowest production costs in the world, at $31 a barrel. Oil produced in the United States from deepwater wells costs $43 a barrel, while oil generated by fracking costs $44 a barrel.
Energy as a weapon: Prices are frequently correlated with how countries perceive the economic, geopolitical and environmental effects of their oil.
Some issues are more pressing than others. For example, oil is frequently cited as a tactic used by Russia to obtain concessions during its invasion of Ukraine.
President Biden eventually signed a restriction on Russian oil imports in response to the Russian invasion, but it’s unclear how well the ban deterred Vladimir Putin. With winter fast approaching, European access to crucial Russian oil is suddenly in question.
The United States faces a fundamental difficulty since a significant portion of its refining capacity was intended to process the heavier and more difficult to refine crude supplied by the Middle East and other regions. This US capability was not designed to handle the light, sweet crude typical of the thriving oil fields of Texas, Oklahoma and other places.
According to the American Petroleum Institute, the shift of US refining capacity to light crude could cause significant market instability and risk large existing investments.
Most of the time, attempts to address this gap have failed due to environmental objections or other political realities. Most people think nothing will change until new refining capacity is operational or existing capacity is expanded to accommodate what the United States produces. Such a change would be costly.
Saudi Arabia has overtaken Russia to become India’s second largest oil supplier.
As refiners buy Russian crude available at a deep discount in the wake of the Ukraine crisis, Russia has overtaken Saudi Arabia to become India’s second largest oil supplier after Iraq, data shows. the industry.
About 25 million barrels of Russian oil, more than 16% of their total oil imports, were purchased by Indian refiners in May.
According to the data, Russian-origin crude rose to 5% of India’s total maritime imports in April for the first time, from around 1% in 2021 and the first quarter of 2022.
India, the world’s third-largest oil consumer and importer, has long defended its decision to buy crude oil from Russia after President Vladimir Putin authorized an invasion of Ukraine. “Russia’s energy purchases remain small compared to India’s total consumption,” the oil ministry noted last month.
In May, Iraq remained India’s top supplier, and Saudi Arabia is now its third supplier.
India increased its oil imports from Russia during rising energy prices taking advantage of low prices.
India consumes over 85% of the world’s oil, which is imported, ranking third behind the United States and China.
The price of Russian Urals crude oil fell as fewer governments and international companies chose to avoid buying Russian energy exports following its invasion of Ukraine. For this reason, Indian refiners bought Russian crude oil at a discount of up to $30 per barrel.
Until now, the downside of crude has been its expensive freight.