Production & Exports of Crude Oil & Petroleum Products Soar to Record in 2023, SPR Gets Refilled (Slowly) - WOLF STREET

Production & Exports of Crude Oil & Petroleum Products Soar to Record in 2023, SPR Gets Refilled (Slowly) | Wolf Street

US oil production boom has dramatically changed global energy dynamics.

By for WOLF STREET.

Crude oil production in the US soared to a record 12.9 million barrels per day in 2023, up by 158% since 2008, when fracking started becoming a significant factor.

The surge in production in 2022 and 2023 was a result of much higher oil prices starting in 2021. In commodities, the cure for high prices is high prices because they encourage producers to ramp up production, and the surge in supply then brings down prices. Frackers can ramp up production with astonishing speed, as we have seen.

In 2018, the US became the largest crude oil producer in the world, and has kept that position since then. By 2020, the US – which had long been desperately dependent on imports – became a net exporter of crude oil and petroleum products on an annual basis, exporting more than importing.

US oil production has dramatically changed global energy dynamics – including the advantages of relatively cheap and reliable energy in the US for transportation and industrial uses.

Fracking has also turned the US into the largest producer of natural gas in the world, with natural gas production and exports jumping to records in 2023, and with overproduction since 2009 crushing the price of natural gas along the way, with big long-term implications for power generation in the US. Plentiful, stable, and relatively cheap energy is a huge benefit to US industrial users, businesses, and households.

Exports and Imports of crude oil and petroleum products.

Exports of crude oil and petroleum products soared by 6.6% in 2023, to a record 10.15 MMb/d (red line in the chart below).

Imports edged up to 8.5 MMb/d, far below the levels in the prior decades, which had peaked at nearly 14 MMb/d in 2005 (blue line).

Where the red line is higher than the blue line, that’s when the US became a net exporter of crude oil and petroleum products:

Exports of crude oil and petroleum products come in two big categories: About 40% of exports is crude oil (blue area in the chart below), and about 60% of exports are petroleum products (red area).

Exports of crude oil spiked by 13.5% to 4.06 MMb/d in 2023.

Exports of petroleum products rose by 2.5% to 6.1 MMb/d. Value-added petroleum products include gasoline, diesel, and jet fuel, of which the US exported 2.1 MMb/d combined in 2023.

The US oil trade is vast and complex.

Many refineries are refining not only domestic crude oil, but also imported crude oil, and export the refined petroleum products. This is a huge business on the Gulf Coast.

And it’s even a big business in “oil island” California. The state is not connected via pipeline to the producing regions east of the Rockies. Refineries in the state get some crude oil from California production, get some from Alaska by ship, get a little by rail from other states, and import crude oil from other countries. And then they sell product into the market and export gasoline, diesel, jet fuel and other products to other countries, mostly to Latin America. The West Coast (PADD 5) exported 0.39 MMb/d to other countries in 2023.

The US, having transitioned over the years from being the world’s largest net importer to being a net exporter, has changed the global equation and the global energy trade.

Exports of crude oil and petroleum products by country.

Mexico is the largest customer of the US, largely buying refined product, some of which is shipped from said refineries in California.

China is the second largest customer. In terms of the European countries on the list: these are the countries where the product is offloaded and transferred to the European network of pipelines; the end-users may be other EU countries.

| Exports of crude oil & petroleum products in 2023 to: | | |
| MMb/d | | |
| 1 | Mexico | 1.17 |
| 2 | China | 0.98 |
| 3 | Netherlands | 0.86 |
| 4 | Canada | 0.80 |
| 5 | Japan | 0.62 |
| 6 | South Korea | 0.60 |
| 7 | India | 0.40 |
| 8 | United Kingdom | 0.36 |
| 9 | Singapore | 0.34 |
| 10 | Spain | 0.25 |
| 11 | Brazil | 0.24 |
| 12 | Taiwan | 0.24 |
| 13 | France | 0.22 |
| 14 | Italy | 0.20 |
| 15 | Chile | 0.18 |

Imports of crude oil and petroleum products by country.

These are the top 10 countries from which the US imported crude oil and petroleum products. Canada is by far the largest source, followed by Mexico. Both combined accounted for 63% of total imports by the US in 2023. And that’s a good thing. Saudi Arabia, #3, accounted for only 5% of US imports. And that’s a good thing too.

| Imports of crude oil & petroleum products, 2023 | | |
| MMb/d | | |
| 1 | Canada | 4.42 |
| 2 | Mexico | 0.91 |
| 3 | Saudi Arabia | 0.44 |
| 4 | Iraq | 0.32 |
| 5 | Brazil | 0.26 |
| 6 | Colombia | 0.23 |
| 7 | Nigeria | 0.16 |
| 8 | Ecuador | 0.14 |
| 9 | Venezuela | 0.13 |
| 10 | South Korea | 0.13 |

The Strategic Petroleum Reserve.

The Biden administration released large portions of the Strategic Petroleum Reserve from mid-2022 through June 2023 to push down the price of crude oil that had spiked. Since August 2023, the SPR is being slowly refilled.

The SPR was created decades ago after two massive oil shocks in the 1970s when the US was desperately dependent on crude oil imports. The idea was to give the US some reserves that, in addition to its own production, would prevent the US from running out of oil for a period that would be long enough to line up alternatives.

But the situation has changed. The US has become the largest producer in the world, and a net exporter of crude oil and petroleum products, and it’s receiving over 60% of its much reduced imports from Canada and Mexico: This raised the question if the SPR is still needed at all.

Starting in 2017, the Trump administration began draining the SPR for that reason. Between 2017 and the end of 2020, the SPR was reduced by 8.2%.

The Biden administration then began dumping large amounts of crude oil on the market to push the prices that had spiked sky-high back down. And prices plunged for all kinds of reasons, including a turn in market psychology, the huge ramp-up of US production driven by high prices (see first chart), and the releases not only from the US SPR but also the coordinated releases from petroleum reserves in other countries.

The SPR is now being slowly refilled, at lower prices than the prices at which the crude oil was sold. Sell high, buy low is good businesses for taxpayers for a change. So the SPR served a purpose: helping to push down spiking prices and ending a market mania. And that function, that it wasn’t designed for originally but that turned out to be useful, may yet extend its lifespan:

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.