U.S. on Track to be Net Fuel Exporter

Reasons include high demand from emerging markets, weak domestic economy

Published in CSP Daily News

WASHINGTON -- U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years, reported the Wall Street Journal.

A combination of booming demand from emerging markets and faltering domestic activity means the United States is exporting more fuel than it imports, upending the historical norm.

According to data released by the U.S. Energy Information Administration (EIA) on Tuesday, the United States sent abroad 753.4 million barrels of everything from gasoline to jet fuel in the first nine months of this year, while it imported 689.4 million barrels.

That the nation is shipping out more fuel than it brings in is significant because it has for decades been a voracious energy consumer, said the report. It took in huge quantities of not only crude oil from the Middle East but also refined fuels from Europe, Latin America and elsewhere to help run its factories and cars.

As recently as 2005, the United States. imported nearly 900 million barrels more of petroleum products than it exported. Since then the deficit has been steadily shrinking until finally disappearing last fall, and analysts say the country will not lose its "net exporter" tag anytime soon.

"It looks like a trend that could stay in place for the rest of the decade," Dave Ernsberger, global director of oil at Platts, which tracks energy markets, told the newspaper. "The conventional wisdom is that U.S. is this giant black hole sucking in energy from around the world. This changes that dynamic."

The growth in exports is part of a "transformation of the energy system," Ed Morse, global head of commodity research at Citigroup Inc., told the paper "It's the beginning signs of a process that will continue for the next decade and will point toward energy independence."

The shift is one of the clearest demonstrations of the diverging fates of the United States and emerging market economies. While the United States labors under stubbornly high unemployment and sluggish growth, emerging-market economies are growing strongly, bolstering demand for fuel, the report said.

U.S. customers have been pulling back in part because an anemic economic recovery has left millions still looking for work. In August, U.S. drivers burned 7.7% less gasoline than four years earlier, when gasoline usage peaked. Production of ethanol made from corn has also ramped up dramatically in recent years, cutting into the need for other fuels.

Now, "we're not using as much," James Beck, an analyst at the EIA, told the paper. "Prior to 2008, basically anything we produced, we used."

But U.S. drivers aren't seeing much benefit in the form of lower prices because refineries on the Gulf Coast are shipping much of their output to places where demand is strong, keeping prices high.

Also adding to the U.S. exporting firepower: Refineries are more efficient, giving them an edge over older facilities in Europe. New drilling methods are boosting U.S. oil production, helping ensure steady supplies of raw material for refiners to process, the report said.

For decades through World War II, the United States was a net exporter of petroleum products, with sales reaching a high of 126 million barrels in 1944. The country then became a net importer in 1950, and grew increasingly dependent on foreign supply in the 1960s. Net imports peaked just above a billion barrels in 1973, the year domestic oil prices spiked amid the Arab oil embargo. After falling off in the 1980s and 1990s, net imports spiked again in the middle of the last decade before tapering recently.

To be sure, the balance could shift back relatively quickly. If the U.S. economy were to rebound sharply, domestic need for fuels refined from crude oil could also shoot back up, which could increase crude import demand. In addition, U.S. refineries could lose customers if foreign economies falter, sending the United States back to being a net importer, added the report.

Meanwhile, export demand is boosting corporate profits for oil majors, such as Exxon and Royal Dutch Shell PLC, and major U.S. refining firms, such as Valero Energy Corp. and Marathon Petroleum Corp.

"Unless there is a recession around the world, we're going to be exporting for quite some time," Mike Loya, head of Americas for Swiss energy-trading firm Vitol Group, which moves more than five million barrels of crude oil and petroleum products every day, told the Journal.

Keywords: 
petroleum