The United States consumes approximately 20 million barrels of petroleum products every day (per the EIA in 2017
). This includes crude oil, liquids produced from natural gas, and biofuels. Figure 1 shows that this number has been relatively constant since the late 1970's with some fluctuation based on economic conditions and world events. What's remarkable about this is the fact that during that period the US population has grown from about 220 million to 330 million people, or by 50%. That means that oil consumption per capita has decreased by one-third.
The primary use for oil is transportation in the form of gasoline and diesel fuel, which consumes over 50% of all oil used in this country. Other uses are fuel oils for heating and electricity generation, asphalt, and as feedstock for chemicals, plastics, and synthetic materials.
Figure 2 shows US crude oil production from January 1920 through November 2017. US production peaked at just over 10 million barrels per day in 1970. Throughout the 1970's up until about 1985 production remained relatively constant at just under 9 million barrels per day. At that point it started a relatively constant and quick decline to about 5 million barrels per day in the late 2000's. 2006 was the year that the world started to change, and the power of OPEC
(Organization of Petroleum Exporting Countries) to control world oil prices began to dramatically decline. A number of factors aligned to reduce US dependence on imported oil: improvements in vehicle efficiency, changes in consumer behavior, a decline in consumption associated with the economic downturn starting in mid-2007, a rise in the use of domestic produced biofuels (ethanol and biodiesel) and, most importantly, new drilling technology in the form of horizontal drilling and fracturing, or "fracking" (see OWOE: What is hydraulic fracturing
). These technologies allowed oil companies to economically unlock the millions of barrels of oil trapped in US shale oil reservoirs and dramatically increase domestic oil production.
Figure 3 superimposes US oil production and importation up through 2014. In 1970, when domestic production peaked, imports were at approximately 1.4 million barrels per day. Imports then began to rise to offset dropping domestic production and an improving economy until they peaked at approximately 6.6 million barrels per day. Starting with the economic recover in the early 1980's, production and imports are almost a mirror image of each other, with the increase in imports slightly outpacing the decline in production. Imports peaked at 10.1 million barrels per day average for the year in 2005.
As a result of these trends, in 2014 imports of oil had dropped to 7.4 million barrels per day average for the year out of a total of just over 16 million barrels per day, or approximately 46% of the oil consumed that year. Until this point, OPEC's strategy was to cut back their production to maintain the price of oil above $100 per barrel. But then, Saudi Arabia made the strategic decision to flood the market with cheap oil with 2 goals - maintain OPEC market share of world consumption and kill the relatively high-cost US shale oil industry. The result was a dramatic drop in oil price to about $25 per barrel. The impact can be clearly seen in Figure 2 as US production plummeted. Then an amazing thing happened. Rather than give up, US drilling and production companies continued to develop their technology to produce shale oil more inexpensively and met the challenge. The result was the ability to make money with oil in the $25 per barrel range. Production increased as quickly as it had decreased just a few years before, and by the end of 2017 US oil production was on the verge of exceeding the previous 1970 production peak.
US oil imports in 2017 remained at their peak level of just over 10 million barrels per day. However, at the same time US exports increased to 6.3 million barrels per day, for a net import of 3.7 million barrels per day. And then in December 2018, the US became a net oil exporter for a brief period, breaking almost 75 years of dependence on foreign oil. Figure 4 (from Bloomberg) shows historical net oil imports, with January 2019 imports down almost to 1 million barrels per day.
Of the total US petroleum imports, over half comes from the Western Hemisphere. On an individual country basis, per the EIA the following are the 5 largest suppliers
- Canada - 4.0 million bbls/day (40%)
- Saudi Arabia - 0.95 million bbls/day (9%)
- Mexico - 0.68 millin bbls/day (7%)
- Venezuela - 0.67 million bbls/day (7%)
- Iraq - 0.61 million bbls/day (6%)
The top five destination countries for US exports were Mexico, Canada, China, Brazil and Japan. It is interesting to note that in 2017 the US exported more oil to Mexico than it imported, and in 2012 5% of US oil imports were from Russia (number 5 supplier), while in 2017 they dropped to 4% and number 10 on the list.
Based on continuous improvements in vehicle efficiency, societal shift in consumer attitude toward alternative fuels and ride sharing, and the rapid growth in electric vehicles (EVs - see OWOE: Are all-electric cars likely to become the future of transportation?id=6
), the trend toward less domestic oil consumption and greater oil exports is expected to continue.