America’s Home-Grown Energy ‘Cushion’
Posted July 18, 2019
Domestic oil production continues to benefit the U.S. – increasing energy security and driving economic growth – and cushion the economy as well as American consumers against global events that in the past impacted energy supplies, costs and prices.
Strength stemming from the U.S. energy revolution is seen in API’s latest Monthly Statistical Report (MSR), with U.S. crude oil exports setting a new record in June at 3.3 million barrels per day (mb/d), which represents growth of 1.1 mb/d over June 2018. Moreover, U.S. petroleum net imports fell to 1.3 mb/d in June from 2.9 mb/d in June 2018 – a major step closer to the U.S. becoming a net exporter of oil.
In other words, the U.S. has continued to supply virtually all of the world’s growing oil needs for transportation and industry, which has increased the stability of the global supply while generally lessening energy-related tensions.
Here at home, communities across America have experienced benefits of new production, infrastructure, transportation and manufacturing – all of which translate into high-quality jobs, wages and tax revenues that support roads, education and just about everything in between.
Importantly, as the U.S. has fed the world’s needs, domestic prices of West Texas Intermediate (WTI) crude oil and gasoline decreased in June by 19.5% year over year (y/y) and 5.6% y/y, respectively. The U.S. energy revolution continues to confound its critics by showing how resource development and exports have not only been consistent with low energy prices, but actually helped advance them.
Other recent headlines have concerned elevated tensions with Iran and a report by the Bureau of Safety and Environmental Enforcement that more than 1 mb/d of oil and 1.2 billion cubic feet per day (bcf/d) of natural gas production were temporarily shut-in on the U.S. Gulf Coast due to Tropical Storm Barry. Yet global crude oil prices have remained muted.
Also as highlighted in the MSR, the U.S. sustained a record 12.2 mb/d of oil production in June despite less drilling, which tells us that productivity has remained strong at the same time as wells that have been drilled but uncompleted are finally being brought to market with new pipeline infrastructure, especially in the Permian basin as discussed in the API Industry Outlook for Q2 2019.
If there was any weakness in the recent data, it was that the strong U.S. petroleum demand seen in the first half of 2019 as a whole included year-on-year decreases for gasoline and distillates/diesel fuel despite lower prices.
By several indications, the freight trucking sector appeared to be in a recession. As distillate demand and inventories are key inputs to API’s economic indicator, the API D-E-I (Distillate Economic Indicator) decreased by 0.2% in June with a three-month average level of -0.2%, which has accurately captured the slowing of U.S. industrial production.
Although the economy is always working through cycles, having strong domestic energy production is both a potential shock absorber and a dominant strategy. It is a form of economic self-help, advantaging U.S. consumers and manufacturers alike.
It is crucial to recognize these linkages and foster the energy revolution, as it is the first and best hope for continued U.S. and globally prosperity.
About The Author
Dr. R. Dean Foreman is API’s chief economist, specializing in energy and global business. With a Ph.D. in economics from the University of Florida, he came to API from Saudi Aramco Strategy & Market Analysis in Dhahran, where he managed short-term market monitoring and the long-term oil demand outlook. Foreman has more than 20 years of industry experience in corporate strategic planning, forecasting, finance / risk management and regulatory policy at ExxonMobil, Talisman Energy and Sasol North America.
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