Energy Prices & the Costs of Oil

International oil prices are rising; gasoline and diesel fuel are costing more.

American oil and natural gas producers are doing all that they can to keep increasing American crude oil production.

Production Up, Reliance on Imports Down. American oil production is reaching record levels. All of the American oil production that can be refined in the United States is being used here. New American oil production is lighter and lower in sulfur than the historic crude oils processed by many United States refineries. Expanded American production has reduced the nation’s dependency on foreign oil suppliers. This success has reduced American dependency on crude from OPEC countries by over 48 percent since 2007. And, net oil imports have dropped from 60 percent of total U.S. consumption in 2005 to 17 percent now. Most of the remaining crude oil imports (over 43 percent) come from our North American neighbor, Canada.

Future reductions in imported crude will depend on additional modifications of U.S. refineries to shift from the heavier crude oil they now use to the lighter shale crude oils (tight oil) now being produced in the United States.

Help for Global Allies. Meanwhile, American crude oil that cannot be processed is being exported into the world market place where it helps limit world oil prices by increasing international supplies. Additionally, it provides American allies with alternative sources of supply other than OPEC and Russia. Not only is American crude oil participating in the world market place, America’s high technology refineries are major contributors to the international petroleum products market. In 2017, much of the total crude oil and petroleum product exports supplied our neighbors; Mexico received 16.7 percent and Canada received 13.24 percent.

Future Impacts from Supply and Demand. International tensions and international supply tightness in the coming months will clearly affect crude oil, gasoline and diesel prices. But, the substantial efforts made by American producers to grow the supply of American crude oil over the past five years have limited the impact those events will have.

IPAA is the industry’s strongest presence in the nation’s capital and these are important times. The entire oil and gas industry remains under fire from anti-development groups; but with these challenges arise unique opportunities that IPAA is seizing for our members.