For years, politicians have said that the booming American oil industry will make the country “energy-independent.”
To be sure, the United States is the largest oil producer in the world. It is two ahead of Russia, which shocked the world and the oil market by invading Ukraine.Saudi Arabia is the second largest producer
This move has caused gasoline prices to skyrocket to record highs.
However, the United States does not import much oil from Russia.
Nevertheless, shocks to oil supply and demand somewhere in the world can cause spikes somewhere else. Being energy-independent means that the United States exports more than it imports. It does not mean that it is independent of the rest of the world.
“Oil is a global commodity,” said Patrick DeHaan, head of oil analysis for gas price tracker GasBuddy. “We can’t lock in the United States or break out of its global system. We can’t get out of that situation, as we see a shortage of computer chips. Even if we produce some supply computer chips here. , It won’t happen. Don’t fix what’s happening outside the border, with a dramatic impact on supply and demand. “
The United States has strategic petroleum reserves. About 700 million barrels are stored in the underground salt cave along the bay. This is equivalent to about one month’s supply nationwide. President Joe Biden has already approved the release of oil from its reserves twice, but in the long run it doesn’t make a big difference.
Russia is one of the largest oil exporters in the world, but only about 8% of US oil imports come from Russia. Russian oil accounts for about 3.36% of the 20 million barrels used daily by the United States. For comparison, according to the US Energy Information Administration, 50% of imports come from Canada.
However, 8% of that is important in itself. Many US refineries were designed before the domestic oil boom that turned the United States into the world’s largest producer.
The oil that the United States produces primarily today tends to be lighter and sweeter crude oil. That is, it flows faster than many other varieties and tends to have a lower sulfur content.
The problem is that many US refineries were built decades ago, so they were built for heavier, sulfur-rich crude oil, which was more common at the time. So many US refineries actually work most efficiently with heavy sour crude oil imported from elsewhere.
And when oil prices soar, the United States cannot simply pump more crude oil and bring it down again. Drilling is the only way to significantly increase production. It requires investment, oil companies hesitate to spend capital after years of boom and bust cycles, are understaffed, and demand plummets during the coronavirus pandemic. Did.
Ramanan Krishnamurti, a professor of petroleum engineering at the University of Houston, said: “The second is that we need to find a better way to invest capital in the industry, which increases regulatory certainty.”
In the meantime, of course, unless you drive electricity, the driver will feel pain in the pump.
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