Why Is the U.S. Still Importing So Much Oil?

Dr. Tad Patzek is the Chair of UT's Department of Petroleum & Geosystems Engineering .

Texas is leading the way in a massive boom in U.S. oil production: oil exports are higher than they’ve been since the 1950s, when the Suez Canal crisis caused a brief jump in shipments. Imports have dropped significantly, but even with that decline, Americans still import about a fourth of the oil they use. We called Tad Patzek, Chair of Petroleum and Geosystems Engineering Department at at the University of Texas in Austin, to ask why.

Q: So why do we still import so much oil?

A: We have built a very large refining capacity especially on the Gulf Coast, and refineries cannot run at half time. They have to run full-time, at 100% capacity. So, we are importing oil, we are exporting oil, and we certainly are exporting finished products. You know, gasoline, lubricants and so on, so that the refineries are running all the time.

Q: But the situation conjures up this image of two tankers ships passing each other. One is heading toward the U.S., and one is heading away. It’s like we’re bringing in the same product as we’re sending out.

A: Well, not necessarily. We’re not bringing in the same product. The light crude oil or the condensate we are exporting is actually much different stuff than your classical medium gravity, API gravity dense crude oil that we are using in our refineries.

In popular opinion, they’re all rolled into “crude oil.” But they have different compositions and they can not be processed by the same refineries. So, we are trying to export some of the light stuff, so to speak, while we are importing much heavier stuff to process in our refineries.

Many of our refinieries have been specialized to process much heavier crudes from Venezuela, from Mexico, so you can’t change them overnight. That’s why we’re importing oil and we’re exporting gasoline, lubricants, and other products and at the same time, we’re exporting condensate and light crude.

Q: You mention how we’re exporting petroleum products like gasoline. But there are federal laws that restrict the amount of crude the U.S. is allowed to export. The current boom has prompted a debate over whether those regulations should be loosened. What are your thoughts on that?

A: Well, crude oil is an endowment, a national endowment. In the U.S., in the way our economy and system is set up, this endowment is largely privatized. So it is very difficult to have a natural energy policy and think about keeping oil in the ground for the decades to come, for the future generations to use. In fact, it’s impossible.

So we’re trying to do the best we can with the system we have. If you ask me, I think we’re running a high risk of having difficulties in the future because of all we’re doing today. But then again, that system is almost impossible to change.

If you want to look at a very good example of what happened when oil and natural gas were exported by any means possible, Great Britain comes to mind at the end of Margaret Thatcher’s government. She was ousted when great Britain became an national importer of crude oil.

It’s an incredibly important question and it’s going to come back to haunt us in the future. But, then again, we don’t think about the future.

Q: Where does the desire of other oil-producing countries to maintain share in the the U.S. market come into play? It’s been said that Saudi Arabia wants to keep prices low to maintain market share.

A: So, its not only the oil production. There’s also an ever-growing production of condensates and ultra-light oil, and growing production of natural gas. And then you superimpose that boom on a stagnating or even contracting global economy — there’s less demand.

Then there are the oil exporting countries which need to have certain cash flow in order to realize and maintain their social programs. So, countries like Saudi Arabia or Kuwait or United Arab Emirates or Venezuela or Nigeria — they all have certain fixed costs of running society and social programs, education … Well, anything for that matter.

So they are very sensitive about how much stuff they can sell. And so that’s where the market share is entering the picture.

They also, and I don’t know that any better than you do because nobody’s going to tell us, I think that the Saudis are reminding America that we are not a ‘Saudi Arabia of Shale Oil.’ That our production is very expensive and that they can actually make it difficult for us to expand shale production at the certain oil price.