Spotlight: Era of energy independence for U.S. yet to come

Source: Xinhua| 2018-12-24 04:00:20|Editor: Li Xia
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by Lu Gao, John S. Marshall

HOUSTON, Dec. 23 (Xinhua) -- The United States becomes the world's largest crude oil producer in 2018, surpassing Saudi Arabia and Russia, and it is eager to export its energy resources and related technologies to other countries.

However, experts warn that being a net importer of energy, the United States is still vulnerable to global oil supply interruption and market manipulation. The time of "energy independent" is yet to come.


U.S. crude oil output, particularly from light sweet crude oil grades, has rapidly increased since 2011. According to the U.S. Energy Information Administration (EIA), U.S. crude oil production exceeded Saudi Arabia for the first time in more than two decades in February 2018. In June and August, the United States surpassed Russia in crude oil production for the first time since February 1999.

EIA forecast that U.S. crude oil production will average 10.7 million barrels per day in 2018, up from 9.4 million barrels per day in 2017, and will average 11.5 million barrels per day in 2019. The agency expected that U.S. crude oil production would still surpass that of Russia and Saudi Arabia through 2019, maintaining the largest producer in the world.

EIA said the oil price decline in mid-2014 resulted in U.S. producers reducing their costs and temporarily scaling back crude oil production. However, after crude oil prices rose in early 2016, investment and production began increasing later that year.

Coinciding with higher production, U.S. crude oil exports saw a steady increase in 2018. The United States exported more crude oil and petroleum products than it imported during the week from Nov. 24 to Nov. 30. It was the first time for the country to export more crude oil and products than it imported in weekly data dating back to 1991.

During the week, the United States exported an estimated record 3.2 million barrels per day of crude oil as well as an estimated 5.8 million barrels per day of petroleum products such as distillate fuel oil, motor gasoline and propane. EIA said it showed a longer-term trend of declining imports of crude oil and increasing exports of petroleum products and crude oil.

At the same time, U.S. refinery capacity operation has been at its record highs. The increase in refinery output of petroleum products has outpaced growth in U.S. consumption of petroleum products, leading to an increase in petroleum product exports.

Edward Hirs, energy fellow at the University of Houston, told Xinhua that the U.S. economy can enjoy the benefits of the world's No. 1 crude oil producer.

"To U.S. economy to have an industry grown like this is very beneficial. Texas is now producing 4.5 million barrels a day. Five years ago, it was just 1 million barrels a day. Strategically it lessens U.S. reliance upon overseas producers," he said.


During this year's CERAWeek, an annual high-level energy meeting, U.S. Energy Secretary Rick Perry said the country seeks to ensure the energy security as it is the roadmap to economic prosperity.

According to him, the United States is embracing "new energy realism" with the help of industrial innovation and technological improvement.

The new energy realism rests on the fact that the United States is amid an incredible energy revolution. This dramatic process is a decisive break from the 1970s, when the United States followed a flawed policy, said Perry.

A significant portion of the country's population is old enough to remember when the Organization of the Petroleum Exporting Countries (OPEC) cut off oil to the United States in the 1970s because of its support of Israel in the Arab-Israel war. Gas prices soared and the United States slipped into a deep recession because of the embargo of crude oil.

Recalling the old pessimistic view of U.S. energy strategy in the 1970s, Perry said there was commonly accepted claim that the days of energy abundance were over, and that if new reserves were found it would be too costly to retrieve or they would harm the environment.

Perry argued that the truth was there was not a shortage of energy, but a shortage of innovation. Thanks to industrial innovation and technological breakthroughs, the United States has moved from an era of "perceived energy scarcity to one of unprecedented energy abundance."

Yet energy specialists argue that being the world's largest crude oil producer is positive, but for the U.S. economy as a whole, it's not as a big achievement as it seems like. This is mainly because the country, though no longer solely dependent on oil from the outside suppliers, is still a large net oil importer.

"The United States is still a net importer of oil and (petroleum) products," Michael Maher, a senior program advisor for the Center for Energy Studies at Rice University's Baker Institute for Public Policy, told Xinhua in a recent exclusive interview.

"And so, what that means is when (oil) prices go down the benefit to the United States is not as quite a big deal as it was when we were a much big importer. When prices go up the good news is the United States economy isn't affected as negatively as it would have been if you didn't have all this growth in U.S. (oil) production," he said.

Maher's opinion was echoed by Hirs, who believes the United State has not achieved energy independence, at least "not from a strategic perspective or from an economic perspective."

"The United States is still a net importer of oil. So anything that happened in the world market has a direct impact on the U.S. oil and gas market," Hirs argued.


In 2018, oil prices have whipsawed, climbing to almost 80 U.S. dollars a barrel, then more recently dropping to around 50 dollars a barrel. The sharp decline in oil prices is putting smiles on drivers across the United States, who are paying less for gas than a year ago. But the decline is also sparking concerns in the Texas oil patch, in corporate boardrooms across America and around the world that a freefall in oil prices could bear mixed tidings for the U.S. and world economy.

Experts argue that the volatility of world oil market also cast a shadow on U.S. benefit of being the world's largest oil producer. Though no longer solely dependent on oil from the Middle East, the country still has a vested interest in stability in the region.

Hirs explained to Xinhua that the reason why the United States doesn't act as a player to change the global market is because it is a high-cost oil producer comparing to the OPEC.

"The shale plates and the Gulf of Mexico are very high cost places to produce oil. So the U.S. is not competitive with lower cost oil. The U.S. is the marginal producer. As long as OPEC and Russia work to maintain a high price, then the U.S. oil producers are able to produce and make a living," he said.

The United States relies on OPEC to provide less expensive oil since 1974 and that appears to be the prevailing strategy, Hirs continued, adding that the strategy makes the United States vulnerable to interruptions of supply and to market manipulations by OPEC.

According to Maher, China is another factor that has impact on the U.S. energy industry and the global oil market.

"As China's economy has grown and its global market has grown, it, too, has interests in making sure there is stability in the Middle East," Maher said. "Oil demand growth in China is much more important to the United States because it has been a growing market for oil."