Flow Level Pressure

Why Does the US Both Export and Import Oil?

Oct 26 2017 Comments 0

From a logistical perspective, it doesn't make sense to both import and export a product. Technically, shouldn't they simply cancel each other out? As far as the US is concerned the answer is no. While in the years leading up to the shale oil boom US crude oil exports were nearly non-existent, today they’re an established part of the American economy.

OPEC embargo triggers export decline

It started back in 1973, when OPEC unveiled an oil embargo. In response the US introduced a crude oil export ban as part of a national energy bill designed to alleviate any future oil crises that could arise. Basically, the export ban restricted the US from exporting crude oil to all countries except Canada.

As a result, US oil production drastically declined over the next three decades. Then, America struck gold. Not only did it discover a glut of oil reserved but new technology also allowed it to extract oil more efficiently than ever. US crude oil production soared and triggered a shift in market dynamics.

US glut forced WTI prices down

As the US was not allowed to export oil a surplus emerged, which caused the longstanding premium on West Texas Intermediate (WTI) over internationally traded Brent crude to disappear. Producers were forced to start trading WTI at a discount, with US refiners more than happy to purchase the discounted crude. They were then able to export the finished fuel products with big profit margins. The ban didn't cover finished products which meant there were lucrative margins to be made.

Market sanctions lifted in 2015

The industry spent years lobbying for change, with demands finally met in 2015 when President Obama approved the Consolidated Appropriations Act. As well as channeling a huge US$1.15 trillion into "exploration, production, storage, supply, marketing, pricing, and regulation of energy resources" the bill also stated that "no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.”

Today, the US exports crude to almost 30 countries, with 2017 monthly exports regularly topping one million barrels per day. That said, it also imports around eight million BPD of crude oil. Why? It all simmers down to quality.

Heavy vs light

The US produces big quantities of heavier and sourer crudes, which contain bigger hydrocarbon molecules and a higher sulfur content. US refineries are built to process these types of oil, with refiners spending billions on sophisticated equipment like fluid catalytic crackers, cokers and hydrotreaters.

While the US does produce a lot of light sweet crudes like WTI and Brent, it's in the best interests of refiners to allow these lighter crudes to be exported and instead import oil that's better suited to their refineries.   

For US refiners, new technologies play a key role in maximising efficiency and margins. 'Non-Invasive Clamp-On Ultrasonic Flow Measurement of Crude Oil' spotlights the latest technique being used to measure flow levels without compromising production or supply.

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