U.S. dependence on petroleum imports is falling

The United States was so dependent on foreign oil that by 2008 it imported two-thirds of what the country’s refineries needed to produce enough gasoline, diesel and the other petroleum products to meet the country’s needs.

But recently the federal Energy Information Administration reported that in 2010 imports had fallen far more than many realized — to 49 percent of the country’s needs.

What happened?

Part of the big drop resulted from the federal agency’s using a different measurement — net petroleum imports — widely viewed as a more accurate way to judge overall dependence on foreign petroleum. The figure counts imports of crude oil and of refined petroleum products such as gasoline and diesel, but it also subtracts exports of U.S. petroleum products, which have been growing.

The country recently stopped being a net importer of petroleum products for the first time since at least 1973, as the country’s refiners sold more gasoline and other end products to other countries.

A second factor is simply lower demand for petroleum products, in large part a result of the sour economy, but also helped by more efficient cars.

And on the supply side, U.S. oil production, after languishing for years, is on the upswing.

One example is North Dakota. Perhaps within a year the state is expected to supply more oil for domestic use than the 1.1 million barrels a day that Saudi Arabia now exports to the United States.

In addition, biofuels, mainly ethanol, are meeting more fuel needs. And natural gas liquids, a byproduct of natural gas that can be used to replace some petroleum products, are surging.

Put them all together, and the United States has cut its dependence on imports substantially — with further declines possible if the trends continue.

“It’s a silent revolution,” said Lehi German, publisher of the newsletter Fundamental Petroleum Trends. “This is a big deal.”

The size of the shift has been somewhat hidden by the different numbers that have been used to describe the country’s dependence on foreign oil.

One measure looks solely at the percentage of imported oil used by refineries. T. Boone Pickens, who backs a plan to use more natural gas, likes to use that gauge, which topped 66 percent in 2008 and dropped below 62 percent in 2010.

Critics of that standard say it overstates U.S. dependence on imports because it ignores other fuels being produced in America, and it ignores how much of that oil is re-exported as refined products.

But the net imports standards reflect those extra supplies and growing exports. Taking everything into account, the country’s net petroleum imports peaked at 60.3 percent in 2005 and dropped to 49.3 percent in 2010.

“It’s a more comprehensive picture,” said James Williams, an analyst for WTRG Economics.

That picture has been changing dramatically for several reasons.

•Biofuels, which are now almost entirely corn-based ethanol, have already displaced about 5 percent of gasoline supplies and are being counted on to do more. A federal mandate would triple production from 2010 levels to 36 billion gallons a year in 2022. Most of the extra supply is to come from ethanol made with wood, grass and other cellulose.

Although meeting the 2022 target is unlikely, just shooting for it will mean more ethanol is available, and used.

•Estimates of natural gas reserves in shale formations continue to grow, and more of it could be used as a transportation fuel if more vehicles are built or equipped to run on propane or liquefied natural gas.

Such a transition could take years to make much difference, but other natural gas liquids are already a factor. Those liquids are a byproduct of processing natural gas for use to heat homes, and they can be used for petrochemicals and for some transportation fuel. One of them, butane, can be added to gasoline. Another is propane, which is used for heating and for a small but growing amount of transportation fuel.

All of those uses reduce the amount of petroleum products needed, and together they really add up. The Energy Information Administration in a report released in June said the United States produced 5.5 million barrels per day of oil in 2010. But there was an additional 4.2 million daily barrels of nonpetroleum fuels produced, including ethanol and natural gas liquids.

•U.S. oil production is starting to grow. One new source is oil locked in shale formations, including in the Bakken field in North Dakota and Eagle Ford in Texas. The fields combined could eventually produce 2.5 million barrels a day, nearly half of total U.S. production in 2010.

Those new supplies also should go further, thanks to tighter fuel economy standards. For model years 2012 through 2016 they could save 1.8 billion barrels of oil over the life of the program. Also, some demographic changes are holding down the number of vehicles per household, also helping to reduce consumption.

The results of these shifts in supply and demand are already showing up in the need for less imported crude, and there has been an even bigger drop in imported petroleum products, including chemicals and transportation fuels, which in 2006 amounted to about 4 million barrels per day.

Those since have dropped by a million barrels per day while U.S. exports of petroleum products including diesel have grown. In April the United States exported more petroleum products than it received.

Joanne Shore, an analyst for the Energy Information Administration, said those exports have prevented some U.S. refineries from being idled. Gasoline is still being imported, including from Europe, but more diesel is being exported to those countries since they have a bigger demand for the fuel.

“We have a symbiotic relationship with Europe,” she said.

No one is saying that the United States will be able to avoid importing petroleum. But there is a chance to replay what Jay Hakes, author of “A Declaration of Energy Independence,” describes as a forgotten victory.

In 1977, the United States imported enough oil to meet 47 percent of demand. Five years later the country needed only enough to meet 28 percent of demand, in part because of better automotive fuel economy standards, rising Alaskan oil production and cuts in the amount of fuel oil used to generate electricity.

It remains to be seen whether such a steep reduction can happen again, but current trends provide a promising start.

Shore, of the Energy Information Administration, said each of the different ways to measure imports had a place, but they were all pointing down.

“They are all directionally saying the same thing,” she said.

source: kansascity