It seems like every day there’s a new headline about the dominance of America’s petroleum sector. America Could Become Oil King of the World In 2018, U.S. Oil Output Expected to Surpass Saudi Arabia, The Drastic Drop Off In U.S. Oil Imports — these are just a few examples. Yet oil prices have been rising recently, spiking gasoline prices across the country and threatening to eradicate the benefit of the recent tax cuts.
If we’re producing more oil at home, potentially overtaking the world’s largest oil producer, and importing less oil from abroad, what gives? If America’s oil sector was truly as dominant as those headlines seem to suggest, shouldn’t our concerns about high gas prices here at home be a thing of the past?
To answer that, I decided to dig deep into the data — and what I found paints a very different picture from those headlines. The truth is that we’re not really importing less because our growing production isn’t nearly enough to meet our daily demand for gasoline and diesel.
Most of those headlines rely on data and analysis from the U.S. Department of Energy’s Energy Information Agency (EIA). A recent analysis from EIA calculates U.S. net petroleum imports at 19% of total petroleum demand, the lowest level since 1967. But look closer and you’ll see that the devil lies in the details.
According to the fine print and sources at the footnotes of that analysis, petroleum imports, consumption and production are not just crude oil. In fact, “petroleum” products in that analysis even include products that are quite obviously not made from oil — products like hydrogen and biofuels. With the U.S. producing record amounts of biofuels, creating billions of dollars of new revenue primarily to rural Mid-Western communities, one can see how the “petroleum” production number may be a bit inflated.
Meanwhile, crude oil imports are indeed down from their peak in 2005, but have been inching upward since 2014 and the long-term trend is still trending up. (See graph below)
So yes, the production of “petroleum products” in the U.S. has been rising rapidly, and yes, even production of actual barrels of crude oil have been rising. But, and here’s the key, the latter has not been rising fast enough. Why? Because the primary use of crude oil is as a transportation fuel (mostly gasoline and diesel).
Therein lies the problem. While production of total “petroleum products” has increased greatly in this country, much of those petroleum products cannot be used to fuel our cars. Things such as natural gas liquids and liquid petroleum gases cannot be made into gasoline or diesel. Meaning, much of our new petroleum production cannot be used to power the cars and trucks that drive us and our economy.
Given that the primary use of crude oil is for gasoline and diesel (indeed, I imagine these are products most people think of when they hear the term “petroleum products”) we wanted to narrow down EIA’s broad definition of “petroleum products” (which includes non-petroleum products like renewable fuels). Specifically, we wanted to see just how many barrels of crude oil we need to make our fuels, and how many (if at all) need to be imported.
To do this, we used EIA’s data to see just how many barrels of crude oil we need to produce that much fuel (As it turns out, each barrel of oil only yields about 20 gallons of gasoline and 11 gallons of diesel, out of a total of 42 gallons of oil in each barrel. The rest is generally made into jet fuel, fuel oil and other products. So, as demand for gasoline grows, so does the need for the total number of barrels of crude oil).
Once we found out that number, we were able to see how many barrels of crude oil are produced domestically, and also, importantly, if we don’t produce enough, how many barrels we would need to import.
Using this methodology we found that for 2017, we needed on average 14.69 million barrels of oil per day (mbpd) to meet our fuel demand. We then saw that we drilled 9.32 mbpd domestically. An impressive number, but not enough to meet our needs. This meant we needed to import 5.37 mbpd to ensure that we were able to refine enough gasoline and diesel to power our vehicles. Or, put another way, 36.6% of our oil demand needed to be imported, nearly twice as much as what EIA found using their broad definition of petroleum. If those imports were cut off, we simply would not have enough fuel to keep our cars running, just like during the oil embargoes of the 1970s.
So, while the domestic energy revival has gone a long way to reduce our imports from their peak in 2005, we still have a long way to go before we can truly say that we are energy independent and “the oil king of the world.”