Energy and Environment Reporting for Texas

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

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

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.


  • spec9

    Tad Patzek is a great commentator on these issues. I highly recommend his words.

  • EVHappy

    Uh, we import around 8 million barrels a day because we use about 18 million barrels a day and our current production is far less than that. Just look up the numbers – go to Google images and type US oil production consumption vs year. There you go.

    In less than two years the fracking scam will be completely uncovered. This scam is a short term play to get a lot of money into a lot of rich pockets and then they will be shut down due to no more stupid investors giving out their money.

    • Larwit1512

      How’s it a scam if it’s producing oil? A scam would for example, not produce oil.

      • EVHappy

        Let me explain. Most people do not think there is a difference between an two apples on a table, one that was picked in the backyard and the other that needed a 10 mile walk to get.

        Understand now? Let say that a investor gave the person a loan to do the 10 mile trip to get that apple, so he can say he has a business gathering apples. His plan is to build up that business and then sell it to someone who thinks that is a great business.

        So, everything looks great and there are apples on the table. The only problem is, that investor got zero interest loans from US Citizens and the result is apples that take more energy to go get then they return. You actually slowly starve to death because you burn more calories on the walk that the apple gives.

        That is how this oil scam works. The actual operations are in the red, financially, because the costs are higher than the returns,

        I hope that explains it. If not, no worries, if the price of oil stays this low for 6 months there will be huge consolidations in the fracking industry (and in the tar sands). That will be proof that they can not make it.

        Saudis still produce most of their oil from super giant oil fields and these cost 3 to 5 times less than fracking. Thus, they can hold on much longer, as we will see, unless the US government further subsidizes those fracking operations by giving more free money away.

        • Larwit1512

          That’s a pretty terrible example of this.
          1) This is the classic short-term shutdown decision; businesses will not shut down unless the prices are below their variable costs.
          2) The variable costs for already established fields in North Dakota etc.are between $37-$50/barrel. Thus in the short run these wells remain profitable at least until oil gets below $50. In the long-run, yes, companies will minimize fixed capital investment as new wells are not profitable at low prices.
          3) Most of OPEC is far more dependent on oil prices being high then we are on it being low. Iran and Venezuela’s oil production stops being profitable (or alternatively stops funding their broken economies) between$70-$80. I call that a win.
          4) Saudis will have to artificially suppress oil prices forever; the moment oil gets above $50/barrel; the already established operations become profitable again. The moment they let it become $80/barrel; it becomes profitable to continue investing in NEW wells. Will the Saudis willingly forego the revenue of $80/barrel just to crush North Dakota? Hardly likely. You’re talking about a country willing foregoing almost the entirety of its economy, for years and years on end just to crush competition. Hardly likely. It’s far more likely they’re lookin to crush competition across the Gulf; who is a legitimate strategic threat to them and their interests.
          5) The US can both gain time on the Saudis (who are supposedly willing to crush their economy to crush fracking) and buy permanent leverage on OPEC by buying up petroleum at its currently cheap price to massively increase the Strategic Petroleum Reserve. Right now it sits at 70 days of oil supply; buying enough oil to get to a year of oil supply will keep prices profitable for years while reducing any semblance of leverage OPEC has over the US in the long-run.

          • Raul

            Interesting plan. The winners will have had the hedge play in!

          • Larwit1512

            like I said, we’re seeing no evidence of that here by this administration. Don’t be shocked if in two years we’re wondering why oil’s gone up again and we still have no leverage over OPEC.

        • Larwit1512

          You see, the US has other policy levers we could (if we thought ahead strategically) use to ensure the price remains high. I don’t think this administration’s thinking ahead strategically, as just recently they requested to sell a bunch of oil in order to reduce the current supply back to 70 days. Buying up enough oil to maintain the US for six to twelve months would go a long way towards our national security and energy security; and would keep fracking in business for a decade at least.

        • Heidi Sorensen

          I find it interesting that you brought up how incredibly expensive fracking is, which is absolutely true. However the real scam is that these wells last no more than 2-3 years. THAT’s why its an incredible waste of resources. It has had a huge impact on the petroleum market but we as Americans are fooling ourselves if we think that it will bring us closer to foreign oil independence in the long run. In fact, these privatized wells are making a killing now, but as they quickly stop being productive (and are often linked with costly clean ups) and are unable to expand at a rate even close to what we are seeing today, we will once again be knocking on Venezuela’s and Saudi Arabia’s doors to increase our oil imports. This US oil boom has driven market prices down (not too significantly, but still) and has drawn focus away from alternative energy long term solutions. I agree with your explanation, but you missed a key component of the shale scam.

        • BA

          “So, everything looks great and there are apples on the table. The only
          problem is, that investor got zero interest loans from US Citizens and
          the result is apples that take more energy to go get then they return”

          Do you mean “more energy” or “more cost”? Only the later is relevant.

          I think what you are confusing here is that even if the loans are “zero interest” loans, they are not “zero cost” loans. The borrowed money must be repaid. Accountants of course know these things and MUST factor them in to obtain accurate internal rates of return. Whether the production is generated by loans or from cash flow, if total revenues exceed total costs, you have a profit and a legitimate business.

          What you are also forgetting is that old wells may be re-entered and brought back on line by fracturing and do extend the life and profitability of the well. Second, new wells that are produced by fracturing do operate for shorter periods of time but they produce more hydrocarbons over that shorter life. The total amount of gas/oil produced then is equal to or greater than wells produced without fracturing. As we know, if revenues are moved closer to investment, profitability rises rapidly.

          • EVHappy

            If you step back and look at the big picture, the only thing that matters for the global economy is the cost of the net energy for productive economic activity. Conventional, super giant, in-land oil fields returned 100:1. Fracking and tar sand operations return only about 4:1. That is why the global economy is collaping right before our eyes.

            You say that credit must be repaid? Not true. The current amount of global credit makes it impossible to be repaid. It will be forgiven, just like many times in human history. Credit means nothing in real energy terms, especially considering it will never be repaid.

            Resources and the net energy needed to utilize them are the only true drivers of an economy. fluffy financial games are nothing but a smoke screen.

    • Deez Nuts2015 ✓

      “In less than two years the fracking scam will be completely uncovered. This scam is a short term play to get a lot of money into a lot of rich pockets and then they will be shut down due to no more stupid investors giving out their money.”

      Hello from 2 years after you posted this.

      How’s the scam doing?

  • S C

    Just go to a parking lot and see all the “road tanks” people drive and often live 30 miles from work too. We use twice as much gas per person as they do in Europe. We would produce more than we use if people lived near work and drove smaller cars.

    • Freyr Gunnar

      Yes, but driving a compact (or *cycling* to work!) is Unamerican.

    • Lee Reece

      That would be nice if you could afford a house near where you work and had no children, no grocery or other important things to do that requires a car and most times more then a compact

  • Gene_Frenkle

    The Oil Era is coming to an end. The Energy Crisis was about oil AND natural gas and in the 2000s we were discussing building terminals to import LNG…that was pretty scary. The price of natural gas and profitability should really be the price to focus on because we can power autos using natural gas through CNG, electrification, or gas to liquids. The Saudis do not fear fracking, it is EVs and natural gas that they fear! Fracking stabilized oil prices and the US has adapted to $100 barrel oil, but EVs will lower the price of transportation to 1990s levels when oil was very cheap. The Saudis fear the Chevy Volt whereas American frackers will just switch resources to natural gas if oil demand falls.

    • Bucker
      • Gene Frenkle

        Tesla has done really all that needs to be done–an EV can be superior by almost every measure. So now the only issues are battery costs which will come down and the interstate trip which can be solved several different ways. Because Tesla is simply better the price of oil is not really an issue. That said, the superchargers are great but Tesla needs a better solution because with technologies like autopilot highway speeds should increase and higher speeds result in less efficiency.

        • J Hamilton

          EV’s are great but where are we going to get the energy to charge their batteries? There are limited resources for making electricity. Natural gas, Coal, Hydro, Wind, Solar and Nuclear. Coal is taking a big hit by environmentalist and will probably be phases out in the next twenty years. Wind and Solar are in there infancy and will take another twenty years to develope. The Nuclear power plants in the U.S. are few and far between. Hydro power plants are also a limited comodity. That leaves Natural gas. Most coal fueled power plants could be converted to natual gas with a minimum of investment. I must say I am bias toward natural gas. I have been an Oil Field worker for the last thirty six years and lost my job six months ago.

  • http://none.com Jack Everett

    If America is using more oil than it produces why should we be exporting any at all? Sounds like just another corporate energy plan to line their pockets with gold from the higher priced foreign markets. As long as we have corporations like Exxon buying off our politicians we will never have a stable economy.

    • Larwit1512

      What difference does it make? The market for oil is global. Whether you buy a gallon of oil that came from Nigeria, or you buy a gallon of oil that came from Texas; it’s the same price to you. Foreign markets are priced in the same way as domestic markets are, by the intersection of supply and demand. You increase supply and decrease demand like we’re doing right now, prices drop. It’s utterly irrelevant if Exxon’s importing oil to export oil; the cost of shipping said oil is not insignificant and the prices over there are identical to prices here.

    • Bill Wilson

      We’re exporting the stuff we can’t store nor use fast enough to warrant hanging onto it. The condensate produces propane and butane so sells for a lot more than regular crude to foreign buyers. It’s no different than selling our excess farm production to overseas buyers.

    • BA

      ” As long as we have corporations like Exxon buying off our politicians we will never have a stable economy”


      “As long as the unions and the pension plans buying of our politicians we will never have a stable economy”.

      There has never been nor will there ever be “stable markets” in a free society.
      If you don’t mind giving up the latter, you will find very stable markets in places like Cuba. Steady wages, steady costs, steady everything (at $8/day).

    • callmebob

      Because it makes business sense to do it, or they’d be not doing it.

      Offer to pay for refinery mods to process it domestically cheaply enough and I’m sure they’d do it. Get all your friends together, chip in and come up with the $6-10B it would take today to upfit an existing refinery to handle maybe 500,000 bbls/day of just this type – after you spend 5 years getting approval to do it, if that comes.

      Sometimes the best business decision is to choose to let someone else invest their capital. ;)

  • concerned

    big oil companies should not be aloud to export any gasoline what so ever. the rapid increase in gas prices is what broke many families. The big oil companies will continue to play this one out as long as our government has no backbone. I can not believe that the people did not vote out every incumbant that was running this past election. big oil need to be reigned in along with alot of other companies that have ruined the US.

    • Jack E

      The US is NOT ruined. It is just poorly managed by a lot of self-serving politicians, unions and lobbyists. Until there are certain minimum standards for qualifications to run for public office, our country will continue to be served and mis-managed by incompetent fools… from both major political parties.

      • Rack Jabbit

        spot on

        • morgenstern

          How do we ensure the qualifications are a)valid, b) applied fairly. as in the Roman saying “Quis custodet custodies”

  • Bucker

    This throws a wrench in everything


  • David Brune

    Most people do not have any idea what all goes in get oil out of the ground. I have worked in the oil field for 36 years and my Dad worked in the oil field. Most people do not know but the only county, we sell oil to is Canada. Congress said we US can not sell oil outside the country? US built most counties oil fields with our talent and sweat. Sounds like your military? Open US oil to the world. We have an over supply of US oil and we are buying outside oil? Also I lost my job from the oil field. Thanks

  • Timothy

    You people have NO CLUE how the oil industry works… US refinery’s are set up to refine heavy crude. They were set up that way before the big oil boom because America HAD to import most of it’s oil from country’s like Venezuela and Mexico because we couldn’t produce nearly enough for ourselves. So most of the oil we produce has to be exported and we have to import. There is a big oil glut because America can’t refine it’s own oil because we have the wrong tooling in the refinery’s we have and we don’t have enough refinery’s because of environmentalist’s!!! We haven’t built a refinery in 30 years, refinery’s are what actually turn oil in to gas in case some of you idiots don’t know, how much has the US POPULATION GROWN in the last 30 years???

    • Me

      I agree Timothy. How many posting here know how the oilfield works? How many have worked in the oilfield? How many go by what some analyst or environment nut says. If anyone read the article above, our refineries aren’t set up to process the shale oil we produce now. There different gravies of oil, the higher the gravity, the less we can process. Thanks to the tree huggers the government makes it impossible to build new refineries. The rules they impose on the oil industry are more strict than on your cars. Folks honestly don’t have a clue how it all really works, who benefits from it, what steps are taken to ensure safety, etc.. All they want to do is complain how much money oil companies make. Here’s a news flash, alot of companies make huge money off the things they sell to you. Look at Microsoft for example, or Apple. Why don’t yall yell and throw fits over them making so much money? Because they don’t hurt the environment? No, because they aren’t oil companies. However, the one thing people tend to forget is that 90% of the things you use every single day have petroleum byproducts in them. We stop making oil, we go back to caveman days or spend even more money importing foreign oil. Before you start ranting and raving, look up what you would have to give up if we stopped using oil. That’ll change your tune. Sheep people, jeez!!!! Hers one place to look, just do your own search.

  • dianna
  • dianna

    So, does the current vote before the House requesting to lift the ban on exporting more oil mean we now and in the future need not be concerned with our dependance on foreign oil? Does this mean that the oil subsidies can be reduced or discontinued? “In September 2009, Obama and other G20 leaders pledged to phase out fossil fuel subsidies to help curb global warming. Obama also called for eliminating subsidies in 2012 and 2013. And the administration’s 2015 budget proposal again calls for a major cut to fossil fuel subsidies.” http://www.wsj.com/articles/house-plans-vote-on-bill-to-lift-ban-on-oil-exports-1442329626 Does this mean the the Pipeline may in fact not be needed?

  • Cole Griffith

    how much would it cost for the U.S. to use fracking instead of importing oil

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