Much has been written about the run-up in U.S. crude oil exports over the past five-plus years, and rightly so. Who would have guessed a dozen years ago that the U.S. would soon be producing as much as 13 MMb/d, and exporting one-quarter of it? Exports are only half of the story though. In fact, for every barrel of crude shipped or piped out of the U.S. today, two barrels of crude are shipped, piped, or railed in. Put simply, the U.S. refining sector still needs imported oil — or, more accurately, it can’t use all of the light, sweet crude that’s produced in the Permian and other shale/tight-oil plays in the Lower 48, and it still requires large volumes of the heavier crude that’s produced in Canada, Mexico, and overseas. Today, we begin a blog series on U.S. oil imports with a big-picture look at how crude sourcing for the refining sector has morphed in the Shale Era.
First, a little history. Back in the early 1970s, when Neil Diamond — the singer-songwriter behind the title of today’s blog — was at the top of his game, the U.S. faced a serious problem. Domestic production of crude oil had just peaked at 9.6 MMb/d, on average, in 1970, according to the Energy Information Administration (EIA), and was in for a long decline interrupted only by a relatively short-term boost from Alaska North Slope production. From 1970 to 1977 — the year before the Trans-Alaska Pipeline started operating — U.S. oil production (yellow line in Figure 1) fell by 1.4 MMb/d, or 14%, to 8.2 MMb/d and U.S. oil imports (green line) increased five-fold, from 1.3 MMb/d to 6.6 MMb/d. That, plus the OPEC oil embargo of 1973-74, got everyone’s attention, and spurred an “energy independence” crusade that lasted for decades. The Alaska oil boom helped a bit: oil import volumes fell to as little as 3.2 MMb/d in the mid-1980s. But after North Slope production peaked soon thereafter (in 1988), imports resumed a steady climb, topping out at 10.1 MMb/d in 2005, 2006, and 2007.
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