Absolute oil independence
The impact of the astronomical rise in U.S. crude oil production is felt in most parts of the oil market. Needless to say, U.S. net crude oil imports have been on the decline. It peaked above 10 mbpd during the period 2004 – 2007, fell under 7 mbpd by 2014 as U.S. shale output started to increase relentlessly. The trend has not reversed, and net crude oil imports have averaged 2.2 mbpd so far this year, EIA data suggests. Given the quality mismatch between U.S. light grades and refiners’ requirements for heavier and sourer types, gross crude oil purchases from overseas have only retreated to 6.3 mbpd, down from 10 mbpd 20 years ago.
Traditional crude oil exporters have been losing importance. Persian Gulf producers, the most significant of which is Saudi Arabia, have suffered the painful process of losing a decent chunk of the U.S. crude oil import market. Their annual shipment of 2.4 mbpd in 2004 has plunged to below 500,000 bpd this year. They had 25% of the total pie back then compared to 8% currently.
The most profound change, nonetheless, is conspicuous in U.S. oil dependency, as measured by the proportion of the U.S. total oil demand to net U.S. imports of crude oil and petroleum products. This ratio flirted with the 60% level in 2005 when the world’s biggest economy needed 12.5 mbpd of foreign oil, both crude and refined products, to satisfy the domestic demand of 20 mbpd as crude oil output was around 5 mbpd. Fast forward 20 years, and one finds that consumption is stagnant, oil output rose to 13.2 mbpd, and the country has become a net exporter of the black gold to the extent of more than 2 mbpd.
Full oil independence has been achieved. In fact, this net self-sufficiency displays an almost perfect negative correlation (-99%) with domestic crude oil production, as the chart above illustrates. Stable or slightly rising domestic output entails protracted oil self-dependence with all its consequences on U.S. foreign policy, possible Middle East supply disruptions and of course, on U.S. oil balance as echoed in the resilience of CME Group WTI.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
