U.S. Oil Exports Hit 57 Year High

U.S. Oil Exports Hit 57 Year High

The accelerating United States energy boom allowed America to record its highest level of oil exports in 57 years and its second highest level since 1920 in the month of July.

After becoming the world’s largest producer of natural gas in 2010, the United States also became the world’s largest producer of petroleum last month. With U.S. production and exports driving crude oil prices down and forcing other producers to crank up production to maintain cash flow.  

The U.S. Energy Information Agency (EIA) has been compiling statistics on American and international energy trends since 1920. For 40 years through 2010, domestic energy production had been steadily trending down. But since the beginning of 2010, fracturing of shale to exploit “tight oil” has allowed the U.S. liquid fuels production to double to 8.5 million barrels per day (bpd) through July, 2014.   

The rate of increase in the three months since July is truly staggering, as U.S. production leaped from 8.5 million bpd to an estimated 9 million bpd, according to Stratfor Global Intelligence.

The American supply shock to the upside has caused the price of oil to plummet by 25% in the longest streak of continuously falling prices in 13 years. International oil producers panicked as their export revenue withered. According to Stratfor, Libya cranked up production from about 200,000 bpd to more than 900,000 bpd. Saudi Arabia, Nigeria and Iraq also hit the accelerator pedal on production increases.

To put the impacts of the 3.5 million bpd annualized rate of global production increase in perspective, the International Energy Agency only projected that worldwide oil demand would grow by 700,000 bpd in 2014.

The only OPEC members with enough financial flexibility to reduce oil production voluntarily are the United Arab Emirates, Kuwait and Saudi Arabia. Libya, Algeria, Iraq, Iran, Nigeria and Venezuela all need to maximize oil output (at high prices) to finance their budgets and social spending programs. But rather than leading in cuts, Saudi Arabia is prioritizing a greater market share over higher prices, according to Stratfor.

The 401,000 bpd level of U.S. crude oil exports in the month of July must have risen over the last three months in line with production increases. Facing a domestic oil glut, President Obama loosened the four-decade ban on U.S. oil exports on July 24. Prior to the ruling, most U.S. crude oil exports were limited to Canada. But it appears some oil exported to Canada was quietly re-exported to Switzerland, Spain, Italy, and Singapore.

Support for energy production in the U.S. will continue to grow as the price of gasoline continues to fall. At a sub-$3 a gallon price, energy analyst Sue Chang estimated that American consumers will save about $250 million per day. With the summer driving season over and the typical winter drop in demand beginning, the price of gasoline is expected to drop even further. This could provide a happy boast to discretionary income during the holiday shopping period.

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