Why does the U.S. export domestic crude oil and refine foreign oil? - Marketplace (2024)

An oil pumpjack in Texas. Importing foreign crude oil is often cheaper for the United States. Brandon Bell/Getty Images

If you notice that you’re paying more at the pump at some point over the next few weeks, that may be because you’re buying a different blend of gasoline as stocks of winter gas run out and refineries nationwide switch to producing summer blends.

To feed those refineries, last year the U.S. imported more than 8.5 million barrels of petroleum a day.Meanwhile, the U.S. also exported more than 10 million barrels a day.

Wait, what? Why are we selling that oil instead of using it ourselves?

It’s mostly a chemistry problem. The crude oil we’re buying is thick and has lots of sulfur, hence it’s called heavy sour. The stuff we’re pulling up isn’t and doesn’t, so it’s called light sweet.

“All that variation in the chemistry of the oil means that you can’t refine all oil the same way. They have to go through different processes,” said Hugh Daigle, a professor of petroleum engineering at the University of Texas at Austin.

He said our refineries were designed to process oil coming from Mexico and Venezuela. “And a lot of that tends to be relatively heavy and relatively high in sulfur,” he said.

Then a little over a decade ago, shale fracking took off in the U.S., and so did the supply of light sweet oil. But even if U.S. refineries could flip a switch and start refining that oil, GasBuddy analyst Patrick De Haan said it’s coming out of the ground in the wrong places.

“The need is infrastructure,” he said. “You may produce all this light sweet crude oil in Texas. But if you don’t have pipelines to the nation’s refineries to deliver it, how are you going to be able to utilize it?”

So importing foreign crude oil is cheaper. Meanwhile, De Haan said, increasing renewable energy demand is making investments in fossil fuels riskier.

On top of the infrastructure obstacles, economist Kevin Hack with the Energy Information Administration said the U.S. gets a better deal from countries with heavy sour oil supplies.

“Because it’s harder to refine them, they tend to be priced more cheaply than a light sweet crude oil,” he said.

So we buy and refine the cheaper stuff, and we sell our more expensive stuff to places that can’t do that. There’s one more discount: The majority of our oil comes from our closest neighbor.

“There’s also not a lot of ability for Canadian producers to move it outside of Canada,” Hack said.

That strong relationship with Canada makes the U.S. oil supply more resilient to geopolitical turmoil. Oil analysts point to Russia’s ongoing war against Ukraine as an example. There was a gas price spike when countries stopped buying Russian oil, but relatively quickly, the global market reached equilibrium again.

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Why does the U.S. export domestic crude oil and refine foreign oil? - Marketplace (2024)

FAQs

Why does the U.S. export domestic crude oil and refine foreign oil? - Marketplace? ›

The answer to that question is fairly simple. First, there is economics. Decisions to import or export are typically based on supply and demand for a product at that location, as well as transportation costs. Products are often both exported and imported when it makes economic sense.

Why does the US export oil instead of refining it? ›

Crude oil is not a hom*ogenous product. The U.S. continues to import and export crude oil because the viscosity of oil (measured by its API gravity) being light or heavy and its sulfur content being low (sweet) or high (sour) largely determine the processes needed to refine it into fuel and other products.

Why does the US sell oil to other countries? ›

Because of logistical, regulatory, and quality considerations, exporting some petroleum is the most economical way to meet the market's needs.

Why doesn't the United States export crude oil to other nations? ›

Why doesn't the United States export crude oil to other nations? The US does not produce enough petroleum to meet the nations' energy needs, so the export of crude oil has been banned. How is a mixed economy the same as a purely free market economy, and how is it different?

Who does the US export crude oil to? ›

Annual U.S. Crude Oil Exports 1920-2023. The Netherlands was the top destination for U.S. oil exports in 2023, followed by China and South Korea. Since 2018, the primary regional destinations for U.S. crude oil exports have been Europe, Asia, and Oceania.

Why can't the US use its own oil? ›

It's mostly a chemistry problem. The crude oil we're buying is thick and has lots of sulfur, hence it's called heavy sour. The stuff we're pulling up isn't and doesn't, so it's called light sweet. “All that variation in the chemistry of the oil means that you can't refine all oil the same way.

Can U.S. refineries refine US oil? ›

Most of the crude oil produced in the United States is refined in U.S. refineries along with imported crude oil to make petroleum products. For data on U.S. domestic (field) crude oil production, imports, exports, and refinery inputs of crude oil see U.S. Petroleum Supply and Disposition.

Why doesn't Canada refine its own oil? ›

Although Canada is one of the largest oil producers and exporters in the world, it also imports significant amounts of oil into its eastern provinces since its oil pipelines do not extend all the way across the country and many of its oil refineries cannot handle the types of oil its oil fields produce.

Why does US import oil if it has so much? ›

That happens because of a combination of economics and chemistry. The economics are simple: overseas oil, even after shipping costs, is often cheaper than domestically-produced crude.

Does America drill their own oil? ›

In the United States, companies produce crude oil on private and public land and in offshore waters. Most of these companies are independent producers, and they usually operate only in the United States.

Does the US export more oil than we use? ›

Overall, the United States imports more than it exports, making it a net importer of petroleum.

Can America survive on its own oil? ›

Oil Reserves in the United States

The United States has proven reserves equivalent to 4.9 times its annual consumption. This means that, without imports, there would be about 5 years of oil left (at current consumption levels and excluding unproven reserves).

Who sends the most oil to the US? ›

The top five source countries of U.S. gross petroleum imports in 2023 were Canada, Mexico, Saudi Arabia, Iraq, and Brazil. Note: Ranking in the table is based on gross imports by country of origin.

Why do we buy oil from other countries? ›

First, there is economics. Decisions to import or export are typically based on supply and demand for a product at that location, as well as transportation costs. Products are often both exported and imported when it makes economic sense.

How much money does the US make from exporting oil? ›

United States Crude Oil Exports
RelatedLastUnit
Exports266.60USD Billion
Goods Trade Balance-102660.00USD Million
Imports345.40USD Billion
Oil Exports10266.00USD Million

Why does the US import oil because it does not? ›

Why does the US import oil given that it is one of the major producers globally? The primary reason is that many of our refineries are still designed for heavy crude and most of what we produce now is light sweet crude via fracking.

Is US exporting more oil than importing? ›

Crude oil exports of about 4.06 million b/d accounted for 40% of total U.S. gross petroleum exports. The resulting total net petroleum imports (imports minus exports) were about -1.64 million b/d, which means that the United States was a net petroleum exporter of 1.64 million b/d in 2023.

Does the US import refined oil? ›

The United States both imports and exports petroleum (a broad term that includes crude oil and refined products such as gasoline, diesel and jet fuels, and other products; “petroleum” and “oil” are sometimes used interchangeably1) in various quantities depending on cost and demand.

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