Untangling the global oil market
The U.S. is a net exporter of petroleum, so why isn’t it energy independent?
After ordering a drone strike on Qassem Soleimani, Iran’s elite forces commander, President Donald Trump told the media that the assassination was made possible by the United States’ newfound energy-independence. Previous presidents had refrained from such acts, fearing higher prices at the pump, he said, but now, “we are independent, and we do not need Middle East oil.” As is often the case with Trump’s statements, this one is problematic and inaccurate. The U.S. may not need oil from the Persian Gulf, but we are not energy-independent, and never will be. But that hasn’t stopped presidents from trying to spin oil independence into policy justifications.
“Americans will not have to rely on any source of energy beyond our own,” Richard Nixon declared, seeking to quell public angst over the 1973 oil embargo. Yet Americans continued to guzzle petroleum, and oil imports rose, reaching a 10 billion-barrel peak in 2006. In 2009, a number of factors collided, reversing the trend. Americans drove less during the financial crisis; domestic consumption decreased, and imports fell. Meanwhile, the Federal Reserve implemented policies that encouraged investment in high-risk endeavors, including drilling. Global oil prices rose again, as demand from Asia increased. And producers went on a debt-fueled drilling frenzy, deploying horizontal drilling and multi-stage fracking to pull oil from shale formations.
Domestic oil production climbed faster than demand, and imports continued to decline. Near the end of 2019, the U.S. exported more petroleum products than it imported for the first time in five decades. Trump had little to do with it, though, as the causal factors were in motion well before his election. Nor are we anywhere near “energy independence.” The U.S. depends on foreign countries not only to supply oil — importing more than 8 million barrels of crude per day — but also to purchase its petroleum products.
Price fluctuations are acutely felt in the Western United States. People in rural areas drive more and have fewer options for public transit, so high gas prices can break budgets. Meanwhile, the economies of many Western communities still depend on energy extraction, and drilling is driven by the price of oil. So when oil prices drop because the coronavirus has lessened demand for oil in Asia, it reverberates through Western economies.
Here’s a breakdown of U.S. entanglements in the global oil market. The data are for October 2019.
Jonathan Thompson is a contributing editor at High Country News. He is the author of River of Lost Souls: The Science, Politics and Greed Behind the Gold King Mine Disaster. Email him at [email protected] or submit a letter to the editor. Follow @jonnypeace
Sources; U.S. Energy Information Administration, International Energy Agency, Oil Change International
