The Use of Tight Oil Exports As a Foreign Policy Tool Has Failed; the American Consumer Is Paying the Price
During the 30 month time frame used in the chart on the right the Strategic Petroleum Reserve was drained by 273 MM barrels of oil and US tight oil exports totaled 3.8 billion barrels.
All this led to a $32 per BO increase in oil prices in the United States.
Politicians using US tight oil resources as a foreign policy tool want you to believe US oil exports are good; they help stabilize the dollar, create equity and better credibility to bond and US Treasury holders throughout the world (so the US can borrow even more money) and US oil exports maintain a balance of power between the US, China and Russia.
The tight oil industry in the US, where all these oil exports originate, love exports because sending US oil around the world gives them a market for their product they would not otherwise have. I've written about the drilling binge the US tight oil sector went on after the export ban was lifted in 2015, here. The lobbyists the tight oil sector hire to promote oil exports want you to believe scattering American oil around the world helps US national security here at home and lowers the price of gasoline for American consumers.
They're lying. Like this headline, below, for the Dallas Federal Reserve. US tight oil exports are rising as fast as West Texas Intermediate prices here in the US.
There can be no seller's remorse with regard to depleting our nation's natural resources. If exporting Permian tight was important at the time in which it was occuring, it must also prove to HAVE been good years from now. Exports must pass that test of time.
So far, not so good.
Home...
US (tight) oil production has been increasing steadily but is clearly NOT benefiting the American consumer...
Primarily because US crude oil exports continue to rise; those exports are expected to average 4.5MM BOPD by year end 2o23...
From January 2021 to August of 2023 the price of oil has increased over $32 a barrel and the average price of gasoline in the US is up $1.61 per gallon and rising....
US personal credit card debt is the highest it has EVER been and the rising cost of energy in American households is a primary reason for this ...
Public debt in the US has risen to a level only seen a year ago, to nearly $31.5 trillion, with a T. Interest expense on this debt has reached an all time high of over $1 trillion per year. Cheap, abundant energy in the US is not so cheap and soon not to be so abundant...
Rising energy costs have forced the Fed to deal with inflationary trends by increasing interest rates five fold in the past three years. The average household in America is hanging on by a thread...
And as a result of all the above, the US, the largest crude oil consumer in the entire world, now has less crude oil in inventory than the past three years. Low inventories and a reduced volume in our nation's oil IRA, the SPR, is a direct threat to national security, our country's ability to defend itself against aggressors. There is a war raging in Europe...
While the US has been exporting the last of its hydrocarbon resources, something the American Petroleum Institute believes is vital to the security and well being of our world trade partners, the US's credit rating has dropped. The ability for it to keep borrowing more money has actually decreased...
Away...
The US dollar has weakened...
...and its use as the world's "petrodollar" is waning...
China, a recipient of US SPR exports AND US tight oil exports, now has the largest oil savings account in the world by an enormous margin...
The Biden Administration seems intent on picking a fight with China over Taiwan and US relations with China are bad and getting worse...
The US condemnation of Russia's invasion of Ukraine and ensuing sanctions against Russian oil has failed and Russia's production, and corresponding exports, are increasing again. US promises to replace all sanctioned Russian oil has not come to fruition; oil sanctions against Iran, Venezuela and Syria are falling to pieces along with American influence on world oil markets...
The entire eastern hemisphere, including the KSA, OPEC plus, Russia and China appear to have formed an oil "alliance" that almost certainly guarantees Middle Eastern and Russian oil STAY in that region. Russian and Chinese relations are good and getting better, in spite of war in Europe. US relations with the largest crude oil exporter in the world, the KSA, with reserves that will outlast those of the US by decades, is strained, at best...
"Worse Than a Crime, It Was a Blunder
Russia, China and the U.S. are the only true superpowers and the only three countries that ultimately matter in geopolitics. That’s not a slight against any other power. But all others are secondary powers (the UK, France, Germany, Japan, Israel, etc) or tertiary powers (Iran, Turkey, India, Pakistan, Saudi Arabia, etc).
One of the keys to U.S. foreign policy in the last 50 or 60 years has been to make sure that Russia and China never form an alliance. Keeping them separated was key."
Specifically, the U.S. has strived to ensure that no power, or combination of powers, could dominate the Eurasian landmass." Epoch Times
And lastly...
"The US tried to break the back of Russia with US tight oil exports, instead the entire Permian Basin is now rolling over." Luke Gromen
Permian tight oil makes good gasoline and nobody in the entire world uses more gasoline than the United States. Just because the US tight oil sector has elected (for itself) to produce more tight oil than US refineries can currently absorb does NOT mean we will not be able to use that tight oil in the future. In fact, every BO we currently export we will someday soon, wish we had back. We may, or may not then be able to import oil from the Middle East to replace US exported oil; one way or another it will cost a fortune.
You must decide for yourself if US oil exports are, in truth, helping to lower the price of gasoline for the US consumer, if using oil exports as a foreign policy tool is strengthening our long term national security and if it appears to you that our great nation is on the correct path for ensuring economic stability thru abundant, affordable supplies of domestic oil.
Are crude oil exports, in fact, passing the test of time?
I think not. For 3.8 G BO of exports since 2021 we don't seem to have gained a lot of ground at home, or away.
Mike Shellman; 20 August 2023, Oilystuff.com