Despite Challenges of 2020, U.S. Boosts its Energy Security
Posted December 11, 2020
Despite the 2020 COVID-19 recession, the U.S. has reached milestones for energy security and trade, including its lowest imports of crude oil and reliance on OPEC in nearly three decades.
Achieving the milestones this year has enabled the U.S. to be on track to become a net exporter of petroleum and total energy on an annual basis for the first time in more than 60 years. At the same time, U.S. refiners have increasingly leveraged domestically-produced energy, ultimately benefiting households through lower spending on energy.
In short, record productivity has enabled abundant domestic oil and natural gas supplies, amped-up U.S. energy exports and displaced foreign energy imports to the benefit of American consumers. This is the backdrop for the imminent change of U.S. administration, as well as a heightened focus on U.S. energy security – see here and here – even though petroleum products and natural gas have remained abundant and at historically low prices.
On energy security, let’s clarify terms, since it’s often invoked with differing notions of energy independence, dominance or interdependence. A couple of things have remained clear through the 2020 COVID-19 recession.
The first is real economic value. The volume and value of U.S. energy exports took a hit this year but still amounted to $114 billion over the first three quarters.
Within the total, crude oil, refined products and natural gas exports have accounted for the vast majority of U.S. energy exports. The greatest progress in recent years has been made with increased exports of crude oil and liquefied natural gas (LNG), which rebounded to record levels in November per the U.S. Energy Information Administration (EIA).
Moreover, U.S. natural gas exports – via pipeline and LNG -- hit a record total 16.9 billion cubic feet per day in November, according EIA, split about evenly between exports via pipeline and LNG.
This reinforces the importance of global trade relations – especially across Europe and Asia – as well as with our neighbors, Mexico and Canada, with whom supply chains are integrated across the energy complex and manufacturing.
The U.S. celebrated a milestone in September 2019, becoming a net exporter of petroleum and total energy for the first time in more than 60 years. With the 2020 COVID-19 recession and, consequently, the reduction in energy exports, there were weeks and months this year where the U.S. reverted to being a petroleum net importer. However, the U.S. managed to sustain its net exporter status in eight of the first nine months of the year and appears on track to do so on an annual basis for the first time since the 1950s.
Shifting to what we buy from the rest of the world, U.S. petroleum imports recently fell to their lowest levels in 28 years.
As refiners raised their use of domestic light and sweet crude oil produced here at home, U.S. reliance on OPEC also fell to a 28-year low of about 600,000 barrels per day, compared with nearly 10 times more a decade ago. This change would be remarkable for any nation, but it’s even more amazing given the massive scale involved.
We must bottle that sentiment so as not to forget this means real savings that benefit our collective wallets and pocketbooks – and contribute to bottom-line prices and U.S. household energy expenditures, thereby freeing income to afford spending more on food, education, healthcare and other essentials.
Ultimately, this is a form of security Americans must not take for granted as world events, industries and politics evolve.
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.