The U.S. Energy Information Administration (EIA) released a report on July 10 detailing a rather dramatic drop in the volume of America’s net crude oil imports and projecting even further reductions in the coming years. So, what does the term “net imports” mean, and why are they dropping?
It’s an interesting story, one that directly contradicts ex-President Barack Obama’s famous 2011 statement that “We can’t just drill our way” to energy security. It turns out that, given the opportunity by good public policy decisions, America can do just that.
The story begins in December 2015, when then-President Obama put his signature on one of the many “omnibus budget bills” congress has passed in the past decade. That particular bill contained language that Mr. Obama had opposed, but was forced to accept in order to avoid a government shutdown. That language repealed the ban on exports of crude oil that Jimmy Carter had signed into law back in 1977, a counterproductive relic of a time long past.
Without the repeal of that terrible bit of energy policy, the ongoing oil boom in the Permian Basin and the U.S. in general could never have taken place. That’s because our nation’s capacity to refine the light, sweet grade of crude oil produced from the shale plays in the Permian, Eagle Ford, Bakken and other regions was already straining its limits in late 2015.
Had the repeal not passed when it did, many producers would have been forced to halt drilling and begin shutting in wells as early as the summer of 2016. The ability to export their crude has instead opened more markets for U.S. crude and at this point made our country one of the biggest players on the global crude market. The Trump Administration’s sea change in energy policy has also helped to free up the country’s oil producing engine over the past 18 months. As a result, America’s oil production has soared to all-time highs this year, and as of June, it averaged 2.4 million barrels of oil per day (bopd) in exports.
When subtracted from U.S. total imports of roughly 5 million bopd, the EIA expects America’s “net imports” to average about 2.4 million bopd for 2018, and fall to 1.6 million bopd in 2019. Even more amazing, the EIA now believes it is possible that the U.S., whose net imports of crude oil exceeded 11 million bopd as recently as 2008, could even become a net exporter of oil in the early 2020s.
So yes, it turns out America can drill its way to stronger energy security, and a series of smart energy policy decisions helped make it happen. Funny how that works, huh?
This concludes our Shale ‘Splainer for July 11, 2018.