On U.S. Energy Security, Low Energy Prices
Posted October 17, 2019
A major milestone for U.S. energy trade appears imminent. For the first time in more than 60 years, the U.S. may be a net exporter of total energy – based on API’s estimates in our latest Monthly Statistical Report (MSR).
The MSR shows that the U.S. petroleum trade balance decreased to net imports of just 818,000 barrels per day in September – and that at a time when domestic demand was at its highest level ever. With the U.S. Energy Information Administration (EIA) estimating that U.S. net exports of natural gas last month were 5.5 billion cubic feet per day (bcf/d) – more than 900,000 barrels per day in oil-equivalent energy – that would exceed U.S net imports of crude oil and refined products.
While some refer to this milestone as U.S. energy independence, it’s a misnomer because growing U.S. energy exports are a function of trusted global trade interdependence.
Since the U.S. already is a net exporter of coal and natural gas, it appears this historical milestone has arrived. We look to EIA for official confirmation in coming months, but approaching this milestone is nonetheless important.
Again, this matters because the U.S. hasn’t seen this threshold in more than 60 years – since the 1950s. At the same time, the domestic energy revolution behind this development this decade has helped keep low prices and reduce price volatility for oil, natural gas, propane and motor fuels.
September was also remarkable in other ways. Again, by API estimates, the United States in September saw:
- Record production of crude oil (12.4 million barrels per day, mb/d) and natural gas liquids (4.8 mb/d, sustained record) despite slower drilling activity;
- Domestic petroleum demand at its highest level ever for the month; and,
- A seasonal decrease in gasoline prices, even as crude oil prices increased;
Considering how global geopolitics and trade tensions have rankled global oil markets in recent weeks, it’s remarkable that U.S. oil and natural gas production rose so strongly as to satisfy a September demand record yet also push motor fuel prices down.
As consumers, we also may tend to pay more attention when prices rise than when they fall. September was an example when oil prices increased, yet with strong motor gasoline inventories and an end of the summer driving season the average U.S. regular gasoline price fell to $2.68 per gallon in September from $2.71 in August, according to AAA reports.
In fact, the only notable weaknesses in September were for jet fuel and distillate/diesel fuel deliveries. Jet fuel deliveries have generally been a coincident indicator of the economy’s health, while diesel fuel can be a leading indicator.
API’s economic indicator, the API D-E-I© (Distillate Economic Indicator) focuses on the importance of diesel fuel, which reflects activity in freight and industry. In September, the D-E-I had a reading of zero (+0.03) and also a three-month average of zero (-0.03), which historically has corresponded with slowing U.S. industrial production and economic growth.
Three quarters into 2019, we’ve seen underlying strength in overall demand that reinforces how a slowing from extraordinarily strong levels, as the U.S. achieved over the past couple of years, is not necessarily a bad thing.
Hopefully, we will see more months in the fourth quarter of 2019 that show that the United States’ resurgent international petroleum trade prowess has remained consistent alongside solid domestic demand and low prices – the very best of energy security.
About The Author
Dr. R. Dean Foreman is API’s chief economist and an expert in the economics and markets for oil, natural gas and power with more than two decades of industry experience including ExxonMobil, Talisman Energy, Sasol, and Saudi Aramco in forecasting & market analysis, corporate strategic planning, and finance/risk management. He is known for knowledge of energy markets, applying advanced analytics to assess risk in these markets, and clearly and effectively communicating with management, policy makers and the media.
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