U.S. may be inching toward oil independence
U.S. oil imports fell sharply again in 2013 while petroleum exports rose, leading some analysts to proclaim that a new era of energy independence is just a few years away.
Experts largely credit new drilling techniques that have unearthed vast troves of previously inaccessible oil embedded in shale deposits in states such as North Dakota and Texas.
"We're at the beginning of a long upswing," says Citigroup analyst Eric Lee.
Crude oil imports declined 9% last year to 2.8 billion barrels and are down 17% since 2010, according to the Census Bureau.
Meanwhile, exports, mostly of refined gasoline and diesel, rose about 11%, narrowing the country's petroleum deficit by about $59 billion, or 20%, to $233 billion. Lee attributes the exports' increase to the abundance of U.S. oil and reduced U.S. consumption as fuel-efficient vehicles proliferate.
The shrinking petroleum gap was almost entirely responsible for a $63 billion decline in the nation's overall trade deficit last year to $471.5 billion, the lowest since 2009, Census said.
The nation's diminishing dependence on foreign oil doesn't insulate it from wild price swings, because oil prices are set by global markets. But growing U.S. production has added to the world's supply and prevented sharp price increases that could have resulted from political conflicts that reduced oil exports from Iran and Libya since 2012, analysts say.
"U.S. crude oil production has played a major role in offsetting disruptions elsewhere," says Jim Burkhard, an analyst with research firm IHS CERA.
U.S. crude oil production increased to an estimated 7.7 million barrels a day last year from 6.5 million barrels a day in 2012, according to the Energy Information Administration. The EIA expects production to rise another 16% by 2020. But Citigroup's Lee expects even more dramatic gains by then, leaving the U.S. a net exporter of oil and making it virtually self-sufficient in oil production.
Oil independence could safeguard the nation from more severe supply constraints, such as the 1973 oil embargo by Mideast nations that resulted in long gas lines in the 1970s, says analyst Fadel Gheit of Oppenheimer & Co.
Growing production and falling imports also means U.S. consumption increasingly benefits the nation's economy. "You're sending less money abroad, and that's a potential economic stimulus," says John Felmy, chief economist of the American Petroleum Institute.
The oil boom already created about 1.7 million U.S. jobs from 2008 to 2012, IHS CERA estimates. Citigroup expects it to spawn another 3 million jobs by 2020.
Rising production has led to recent calls by the oil industry to lift a 40-year-old ban on most crude oil exports. Last week, the Senate held its first hearing on the issue in 25 years.
When the ban was imposed after the oil embargo, "we believed we were dealing with energy and oil scarcity," Felmy says. "That's not true anymore."