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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Despite Trump’s Rhetoric: U.S. Needs OPEC Oil

Trump Oval Office

President Donald Trump is taking his ‘America First’ energy plan from the campaign trail to the White House website, vowing to achieve energy independence from OPEC and any nations hostile to U.S. interests.

Trump is not the first U.S. President to have promised energy independence. At the height of the 1973 Arab oil embargo, Richard Nixon suggested a project to ensure that by the end of the 1970s, “Americans will not have to rely on any source of energy beyond our own”.

More than 40 years later, America continues to rely on foreign oil imports, and is a large importer and even larger consumer of crude oil. This makes the U.S. crude oil flows an integral part of the global oil market.

The U.S also continues to import oil from OPEC producers, and even if volumes have been consistently below 4 million bpd since September 2012, imports in October 2016 were not a negligible figure - 3.11 million bpd, according to the latest available data by the EIA. To put this into perspective, total U.S. crude oil imports in October were 7.607 million bpd.

If President Trump were to follow through with his vow to free America of OPEC imports, some 3 million bpd must come from non-OPEC producers: an unlikely development in the near term.

Just after he was elected President in November, Trump threatened to block Saudi oil imports. Back then, Khalid al-Falih - the oil minister of OPEC’s biggest producer and the cartel’s biggest supplier to the U.S. – warned the U.S. not to stop Saudi imports, as free trade was “very healthy for oil”. Related: How The Saudi Rift With Egypt Is Spiraling Out Of Control

Now, just two days after President Trump was sworn in, al-Falih reiterated his view that America is “closely integrated in the global energy market”.

The positions that the U.S. and Saudi Arabia take in global energy are very important for global economic stability,” the Saudi oil minister said on Sunday, as quoted by Bloomberg. Venezuela’s oil minister Nelson Martinez chimed in with remarks that there was a lot of interdependence in energy trade, and added that his country’s exports to the U.S. would stay stable.

Saudi Arabia and Venezuela – OPEC’s largest crude oil exporters to the U.S. – do not seem particularly concerned with President Trump’s promises to cut OPEC imports.

Out of OPEC’s 3.11 million bpd in oil exports to the U.S. in October, Saudi Arabia exported 1.023 million bpd of that, while Venezuela exported 724,000 bpd. Bloomberg calculations show that last year, Saudi exports averaged 1.077 million bpd with Venezuela averaging 733,000 bpd, which accounted for nearly 60 percent of America’s OPEC imports of around 3 million bpd.

If OPEC were to be cut off as U.S. crude oil supplier, it’s not only the volume that, in theory, has to be imported from elsewhere; it’s also the heavier crude oils that Venezuela and Saudi Arabia, for example, export to the U.S. Many refineries need heavier crudes to blend with the light tight oils.

In terms of volume, U.S. shale cannot swiftly ramp up production by 3 million bpd: the EIA expects oil production this year to average 9 million bpd, or 110,000 bpd more than last year. Related: Why Cheap Natural Gas Is History

The likely candidates for more non-OPEC imports to the U.S. could be the biggest current non-cartel suppliers and closest neighbors: Canada and Mexico. However, they cannot provide additional 3 million bpd to the U.S. In addition, President Trump’s America First and national defense policies are unnerving the neighbors both to the north and to the south.

Tim McMillan, the president of the Canadian Association of Petroleum Producers (CAPP), said in an interview with Calgary Herald that President Trump’s inaugural address was “a bit of a wake-up call that we need to strengthen our relationships on energy with other countries”.

Mexico is trying to offset years of natural decline in oil production and is auctioning off promising deepwater assets for development, which will take years. In the short term, this will not be Mexico’s primary concern in its U.S. relations, though. It will be President Trump’s commitment to renegotiate NAFTA and his plans to build a wall along the U.S. southern border.

While achieving energy independence from OPEC, if possible, will not be an easy task for the new administration, it’s likely there is at least a bit of undisclosed fear on behalf of Venezuela and Saudi Arabia in the wake of Trump’s first days in office which have fulfilled many campaign promises that, at the time, many skeptics thought were empty.

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Michael Mello on January 24 2017 said:
    Need to do something it's killing small oilfield serves company's like mine
  • Chris Dizon on January 24 2017 said:
    We still need oil because Americans are stubborn. Go Solar. Drive Electric. Only morons and monsters use fools fuel where alternatives exist.
  • brent siddons on January 25 2017 said:
    keystone will deliver 800,000 bpd of NA crude
  • Rock Hound on January 25 2017 said:
    Hey Chris...Yup...Americans are stubborn...while "we" drive electric...on those rubber tires underneath an "electric vehicle" that uses plastic insulation on the wiring and battery cases and, interestingly enough, still needs lubrication and has an interior almost entirely made of plastic while wearing "our" Teva sandals (rubber and nylon)...now, just where does all that nylon, rubber and lubrication come from???...hmmmm...oh yeah, must be hemp.
  • Mulp on January 26 2017 said:
    If Trump imposes a $50 a barrel tariff on imported oil, and an equivalent rebate on exports, the US will be energy independent by 2021 with lots of jobs created. OPEC oil will be imported to Texas, refined, and products exported.

    The terror sponsoring oil dictators will have their money for terrorists cut off.
  • Jack Kalpakian on January 26 2017 said:
    ... like a fish needs a bicycle. It is time to move to local and nearby sources.
  • Mike Hogan on February 04 2017 said:
    The U.S. does not "need" OPEC oil just because it imports it. We are swimming in the stuff; and oil, unlike gas, is a fungible commodity traded worldwide. U.S. refiners are finding some OPEC oil grades that match the equipment profile of individual refineries being offered at attractive prices.

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