I keep hearing over and over that the US imports all of its gasoline and raw petroleum that it used, however when you look at the numbers its the greatest exporter of oil ever. Wouldn’t it make more sense for the US to just take some that they produce and keep it to sell to its own consumers.
In: Economics
Imagine you own a widget factory and you can make 20 widgets a day, which is more than any other widget factory can make in a day.
Now imagine that each day you need to use 23 widgets.
While you make more widgets than anyone, you’re still left with a daily 3 widget gap, so each day – despite making more widgets than anyone else- you need to purchase 3 widgets to meet your needs.
Geography and refinery requirements. It’s cheaper to import from ships o stead of building new pipelines. Also a lot of this production is newer so the pipes and refinery are set up to the opposite flow. It was a issue when fracking took off. We had more oil in area then we could move it. Making a sizable price difference.
Oil is also not the same stuff. If your refinery is set up for heavy sour Saudi oil then it may need retrofitting to convert to sweet light crude.
Much of the crude oil extracted in the US today is lighter type crude oil.
“Sweet” or light crude oil tends to be composed of mostly natural gas, gasoline, and diesel range material. Due to the crude oils that were available (and cheap) for much of the 20th century being more “sour” or heavy, many American refineries balanced the max capacity of the different refining equipment and processes in the refinery around a barrel of crude oil containing much more heavy material, often called gasoil and resid. While these heavier parts can be either thermally or catalyticly converted into lighter materials, they require units to be built in a refinery to do so. Because so much of the initial crude oil processed in the US was heavy, these units were built and expanded upon. An example being Marathon Petroleum spending 2 billion dollars in the early 2010s in Detroit to allow them to run heavy Canadian crude oil. In order to shift a “sour” crude oil refinery to process “sweet” crude oil, you would have to expand its front end processing capabilities. The crude oil distillation unit, the first unit crude oil goes through in a refinery, is built around the aforementioned split of oil, and can’t necessarily handle the quantities of lighter materials that would be produced with running a majority of sweet crude.
Let’s imagine 3 companies.
Company 1 has been in business a long time. It’s made alot of money. It’s invested in its infrastructure. It pumps the oil out, refines it, and sells it to consumers. It gets a big return on investment. It does it continually.
Company 2 has been in business a long time too. But it didn’t invest as much into its infrastructure. It doesn’t have refineries. It pumps oil out. It sells the crude to whoever is willing to buy it. They don’t care where the buyer is located, even if it’s a foreign investor or company.
Company 3 is newer. It doesn’t want to pay what company 2 is asking for their oil, but it found a company out in South America that’ll sell it cheap. So they get it from there.
It helps to remember that it’s different companies with different business operations. Top exporters of oil include ExxonMobil, Conoco Phillips, Chevron, Marathon, and more. Top importers include BP, Sunoco, Shell, and more.
The big chemical plants that turn crude oil into gasoline take a long time to optimize for a specific type of oil. It turns out that oil from the middle east region is ideal for making gasoline without a lot of extra stuff. So the yield is better and they can get great margins on selling a product that will always sell. Once you tune a chemical plant for that type of oil, you don’t change it. It doesn’t hurt that typically the middle east oil is quite cheap, so the added cost of transporting it isn’t a big factor.
The oil from the US is not well suited to make gasoline. It’s more suitable to use it for other things like plastics or heating oil. So there are chemical plants optimized for those purposes, but again they’re not optimized for using middle east oil to make gasoline.
In short, chemical plants are optimized for specific products and the oil and gas companies select the cheapest raw materials that give them the best overall profit.
Let’s imagine that crude oil are fruits, and refined petroleum products are juice. Than, there’s the juicer, which can only accept fruits of the right size and pulp consistancy.
A Semi-truck might run on apple juice. Which is great, because there are many apple trees in the USA, and many apple juicers in the country.
But cars run on Dragon Fruit. There is alot of Dragon Fruit juicers in the US, but there is very little Dragon Fruits growing, so the US imports from Saudi Arabia.
The US contains alot of oranges, but people don’t really care for oranges in the US. So the US export their oranges in Europe.
Now, think of all the different fruits, and the millions of applications of refined petroleum products and compare that to the petroleum global supply, its transformation processes, it’s by-products, it’s intermediary by-products, as well as the derivative markets, and the logistical supply chain, and follow the financial incentives of production, storage, transport, consumption and the geopolitical factors and understand that there is no single individual that really knows and controls the market and you can earn 500k a year as an oil consultant for Big Oil Corp.
Who knew there were so many Petroleum experts on the internet???
Most imports Are from Mexico and Canada. But the real reason is the jones act making inter-US tanker shipping prohibitively expensive.
There is almost no capacity to ship inter US via ship. Oil mostly moves on trains and in pipelines. Even if someone theoretically built a Jones act compliant super tanker, it would still be cheaper to ship a tanker of oil from Houston to China and another tanker from Saudi Arabia to NYC then it would be to ship from Houston to NYC.
Not many answers here are actually ELI5.
It’s a spider web of products going in and out. The total exports are more than the total imports, but there is a lot of both.
The ELI7 version is: There are many grades and forms of oil. Many that we import. Many that we export. There are many regions that use and produce oil. Some region produce more than they use. Some regions use more than they produce. So oil products are constantly coming and out of different regions – both with other regions in the US and with other countries. When you add it all up. There is lots of oil coming in and even more going out.
it’s a global market. Sometimes you’re eating corn from around the corner and sometimes you’re eating corn from mexico
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