Why Does the U.S. Need Oil from Other Countries?
Newsweek, Darragh Roche – 09-03-2022
Why Does the U.S. Need Oil from Other Countries?
Newsweek, Darragh Roche – 09-03-2022
President Joe Biden announced an import ban on oil from Russia on Tuesday in response to the ongoing invasion of Ukraine, and in addition to other severe sanctions imposed on the country by the U.S. and its allies.
The ban has raised major concerns about the rising price of gas at the pump. Although the U.S. is far less reliant on Russian oil than the European Union, the decision is likely to further exacerbate the market.
The U.S is a major oil-producing nation. Some Americans may be wondering why it’s necessary to import oil from other countries in the first place. Experts who spoke to Newsweek explained that the U.S. is not self-sufficient in oil, while market factors play a outsized role in the decision to import the essential fossil fuel.
Biden Bans Russian Oil Imports In ‘Blow To Putin’s War Machine’
Robert Kaufmann, a professor with the Earth and Environment Department at Boston University, researches global climate change, world oil markets and land-use changes.
He told Newsweek that the U.S. uses more barrels of oil per day than it produces, necessitating imports from abroad.
“The U.S. imports oil because consumption of oil products—about 20 million barrels per day—is greater than the quantity of crude oil it produces, about 18 million barrels per day,” Kaufmann said. “This difference, about 2-3 million barrels per day, is much smaller than previous years.”
Oil products include gasoline used to run the vehicles driven by everyday Americans. It is currently experiencing a serious price spike. The American Automobile Association (AAA) tracks the price of gas and reported the national average per gallon at more than $4.25 on March 9.
The Price of Oil:
Kaufmann explained that U.S. oil imports were not the decisive factor in deciding how much Americans pay for a barrel of crude oil.
“The quantity of oil that the U.S. imports has little to no effect on the price we pay for crude oil,” Kaufmann said. “There is one global market for crude oil. That global price sets the price for all crude oils, plus or minus a couple of dollars depending on transportation costs and the quality of the crude oil.”
“Even if the U.S. produced all the oil it needed, U.S. consumers would pay the global price,” he said.
Self-Sufficiency:
Kaufmann said U.S. self-sufficiency in oil would not have the effect of reducing prices.
“Suppose the U.S. was self-sufficient in oil and that oil was selling for $70 a barrel, as it was before Russia invaded Ukraine,” he said. “The invasion raises the price for crude oil on the global market to $110.”
“Would U.S. producers sell U.S. consumers oil for $70 per barrel when they could sell that same barrel overseas for $110? Of course not!” Kaufmann said.
A More Economic Option:
Philip Walsh, professor in entrepreneurship and strategy at Ryerson University in Toronto and principal investigator at the university’s Center for Urban Energy, told Newsweek that foreign oil is imported to supplement U.S. crude oil production.
Walsh explained that crude oil is used “to produce refined petroleum products such as gasoline or heating oil to be used domestically and to be exported to international markets.”
“Since crude oil also comes in various degrees of quality, the economics of refining that crude into petroleum products—and where it is refined—plays a significant role in determining whether the crude is imported or not,” he said.
“If importing crude oil is a more economic option than using domestic crude to produce the refined petroleum product, the market will choose the import option,” Walsh said.
The price of crude oil was around $125 per barrel on Wednesday morning, a decline from a high of more than $130 per barrel on Monday. However, the price could rise further as the war in Ukraine continues. American consumers could also see further rises in the price of gas as a result.
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