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1 1 (January 24, 2019)

handle is hein.crs/govydx0001 and id is 1 raw text is: Congressional Research Service Informing the legislative debate since 1914 S January 24, 2019 U.S. Oil Imports, Exports, and Energy Security In December 2015, P.L. 114-113 lifted restrictions on U.S. exports of crude oil, allowing U.S. exporters full access to world oil markets. The restrictions had been in effect for 40 years. Lifting the export restrictions addressed the changing nature of U.S. oil supply which is characterized by growing output of light oil. Due to the rapidity with which these oil supplies have entered the market, producers initially encountered infrastructure bottlenecks in transporting the new oil supplies to buyers, as well as noting a fundamental mismatch between the characteristics of the new oil supplies and the desired crude oil inputs of U.S. refineries. Many producers of the new oil supplies found that they could only sell their oil at a discount to both West Texas Intermediate (WTI) and other world reference prices of crude oil (e.g., Brent and Dubai). As a result, low realized prices threatened the potential growth of the U.S. oil industry. Producers saw entry into the world oil market as a way to increase demand for their oil and to close the price spread. While opponents of the oil export restrictions pointed to enhanced domestic oil supply and job growth, proponents of the ban claimed that its repeal could lead to higher domestic gasoline prices as well as lower capacity utilization rates and fewer jobs in the refining industry. Also of concern were issues of energy security. Some define energy (oil) security in terms of oil independence. From this point of view, domestic oil supplies replacing imports signified reduced dependence on the world oil market, and hence, greater oil security. Exporting U.S. oil would in their argument leave the United States dependent on imports and the world oil market. Regardless, the United States would remain connected to the world oil market through crude oil imports and petroleum product imports/exports. Evauating Crude Oil Imports and xports Three years have passed since the lifting of the crude oil restrictions, and an evaluation of the effects, both in terms of trade and energy security, can be undertaken. Crude oil exports have risen. From 2008 to 2012 the United States exported on average about 45 thousand barrels of crude oil per day (mb/d). In the next three years, 2013 to 2015, a time characterized by growing U.S. shale oil production, but with the export restrictions still in effect, exports averaged about 316 mb/d (mostly to Canada which was not subject to the restrictions), a six-fold increase. In the three years since the lifting of the restrictions, crude oil exports have averaged over 1.2 million barrels per day (mmb/d), a four-fold increase. Exports have increased each year since the restrictions were lifted, rising from 591 mb/d in 2016 to 1.1 mmh/d in 2017 and 1.9 mmh/d in 2018. Why is domestic oil exported instead of being used domestically? Exports are likely taking place for three reasons. First, the type of oil that has come into the U.S. supply picture in the past five years is light, sweet (low sulfur) oil. Many U.S. refineries are not optimized to use this type of oil. As a result, U.S. oil is shipped overseas while oil of a type appropriate to U.S. refinery demand is imported. This type of trade transaction increases U.S. integration with the world oil market, and it maximizes the value of the output of the oil refining industry. Second, logistical cost issues may determine the sourcing of crude oil. Given the location of a refinery, it may be cheaper to procure oil overseas than to purchase and ship domestic oil given transportation constraints. Third, some large U.S. refineries are owned by foreign national oil companies and they may choose to use their own nation's oil, imported into the United States in their operations. For example, Venezuela owns Citgo Petroleum Corporation and Saudi Arabia owns Motiva Enterprises Company, both with refineries in the Gulf Coast region. Crude oil imports have fallen. From 2008 to 2012 the United States imported on average about 9 mmb/d. In the next three years, 2013 to 2015, imports averaged about 7.4 mmb/d, a decrease of about 18%. In the three years since the lifting of the restrictions, crude oil imports have averaged about 7.9 mmb/d, an increase over the previous three years, but still less than the 2008 to 2012 period. The data suggest that while imports of crude oil declined with the lifting of the export restrictions, they then began to increase, providing some evidence to suggest U.S. dependence on world markets might be increasing. Over the same period, product supplied to the U.S. market (the Energy Information Administration measure of consumption) increased from 19.6 mmb/d in 2016 to 19.9 mmb/d in 2017 and, based on available 10-month data for 2018, is set to total about 20.3 mmb/d. A possible interpretation of these data might conclude that the approximately 700 mb/d increase in U.S. product supplied from 2016 to 2018 resulted largely from the 500 mb/d increase in imported crude oil, again raising the question as to whether growth in the U.S. market is tied to import growth. This picture is altered when net imports are considered. Net imports are defined as gross imports minus exports. This measure brings into sharper focus a nation's dependence on the global market for commodities it both imports and exports. Crude oil net imports have fallen. From 2008 to 2012, U.S. imports of crude oil averaged about 9 mmb/d. In the next three years, 2013 to 2015, net imports averaged 7.1 mmb/d, https://crsreports.congressg

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