A few weeks ago a ship carrying an ultralight oil known as
condensate left the U.S. on its way to South Korea. While the oil
was minimally refined and technically qualified as a refined
petroleum product, it has been regarded by many as the first step
to lifting America's four-decade-old ban on oil exports. But what
is pretty surprising is that at the same time producers are
seeking to export oil as well as additional volumes of natural
gas and coal, America continues to import these same commodities
from other countries. Lets take a close look why that's happening
and why it's not likely to stop anytime soon.
Why America still imports oil
Thanks to the combination of horizontal drilling and hydraulic
fracturing, America has unlocked billions of barrels of oil
trapped within tight shale formations. The surging production
from shale, along with falling consumption, has led to a dramatic
reduction in net oil imports, as the following chart notes.
But despite the surge in oil supply America still imports a
lot of it. In 2013, 33% of the oil consumed in the U.S. was
imported, which is the lowest level since 1985 and down from 40%
the year before. That being said, even as oil imports drop, half
of the oil consumed in American refineries is oil that has been
The reason American refineries prefer imported oil is because
that's the oil these refineries have been equipped to
handle. A bulk of the oil that's imported actually comes from the
Canadian oil sands, which accounted for roughly a third of our
net oil imports and Venezuela, which supplies more than 10% of
our net imports. Both of these countries produce what's known as
heavy oil. Meanwhile, the oil that comes out of shale plays in
Texas and North Dakota is light oil. It's a type of oil that
refineries weren't expecting to be refining as the energy
industry never saw the the shale oil boom coming and instead
invested to build the capacity to refine the heavy oil coming
from Canada and Venezuela. Now, American refineries are
overwhelmed with light oil, which is why producers are pushing
for an end to the export ban even as the country continues to
import the oil from other nations.
Why America still imports natural gas
A few short years ago America was thought to have just a dozen
years of natural gas reserves left. But thanks to the shale boom
the country now sits on reserves big enough to last the country
nearly a century. Because we have so much natural gas, next year
America will export its first cargos of liquefied natural gas
from a facility that originally was intended to import natural
gas. The shale gas boom rendered import facilities like it
useless, which is why nearly all of them are being converted to
export natural gas. Yet, despite the fact that natural gas
production has surged to the point that America has more than it
can use, the country still imports natural gas as the following
While net natural gas imports have fallen to the lowest level
since 1989, they have yet to vanish completely. One of the
reasons for this is because there still isn't enough pipeline
capacity from places like the Marcellus shale to deliver enough
natural gas to meet the needs of places like New England in the
winter. This is why most of the country's remaining natural
gas imports, a whopping 97% in this case, come from Canada.
Last winter, for example, natural gas from a Canadian offshore
helped keep Boston warm. Unfortunately, that came at an
ultra-high cost as the price for natural gas in Boston was more
than seven times higher than the price of natural gas in
Pennsylvania. While that state was oversupplied due to the
abundance of gas from the Marcellus Shale there isn't enough
pipeline capacity to get it to Boston. So, until that capacity is
built America will likely keep importing gas from Canada.
Why America still imports coal
While it's no surprise that America still imports oil and it's
probably even understandable why there's still some residual
natural gas imports, what is likely surprising to learn is that
America actually imports coal. In fact, through the first six
months of this year coal imports surged 44% to 5.4 metric tons.
While that's less than 1% of the expected 862 million tons of
coal expected to be consumed in America this year, it's still a
surprise that we import coal at all.
Two thirds of the coal imported in America is coming from
Colombia. The reason for this is that it costs just $15 per ton
to get Colombian coal shipped into power plants in Florida.
Meanwhile, it would cost $26 per ton to get coal from mines in
Central Appalachia to those plants. There are three reasons why
Colombian coal is cheaper. First, labor costs are cheaper.
Second, coal can be moved on ships carrying 50,000 tons of coal
as opposed to trains that carry 100 rail cars holding 100 tons of
coal apiece. And finally, as the following chart notes, coal
production in the country has fallen dramatically over the past
few years as miners cut capacity in order to improve pricing.
So, despite having the largest coal reserves in the world,
which are enough to last the country 290 years, America still
imports coal simply because it's cheaper to do so.
Despite our vast energy resources America still imports a lot of
energy. We import specific types of oil because that's what our
refineries can handle. We import natural gas because we don't yet
have enough pipelines in place to meet peak demand. And we even
import coal because in some instances it can be cheaper to do so.
That's what happens when we live in a market-driven economy, so
no matter how much energy we produce America will continue to
import it when it's cheaper and more efficient to do so.
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Why on Earth Is America Still Importing
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