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Why the United States Imports Oil

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US oil trade

Despite being the largest oil producer in the world, the United States imports oil to meet its energy needs. In 2018, the US exported ~2.8 billion barrels of crude oil and petroleum products. At the same time, it imported ~3.6 billion barrels of crude oil and products during the year. So, it imported net ~0.9 billion barrels, or ~2.3 million bpd (barrels per day), of crude oil and petroleum products in 2018.

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Several factors contributed to the rising crude oil exports in 2018. One factor is transportation costs. US Gulf Coast states accounted for more than 90% of US crude oil exports in 2018. The increased production in Gulf Coast states is mostly of light, sweet crude oils, which don’t match with the refineries in the region, as they are designed mainly to process heavy sour crude oils. This mismatch results in higher exports.

At the same time, imports remain high, resulting in higher overall trade, even though the net imports (imports minus exports) have fallen. US net imports of crude oil and petroleum products fell in 2018 compared to 2017, as the above graph shows.

US crude oil production

The rising crude oil production has contributed to the rise in US oil exports. According to the US EIA (Energy Information Administration), annual US crude oil production reached 10.96 million bpd in 2018. In December 2018, US crude oil production reached its highest level ever.

Interestingly, despite rising production, top oil companies ExxonMobil (XOM), Chevron (CVX), and EOG Resources (EOG) fell 20%, 15%, and 20%, respectively, in 2018. ConocoPhillips (COP) rose 13% in 2018. Even though crude oil prices averaged higher in 2018, they ended the year 25% down, impacting energy sector stocks.

The Energy Select Sector SPDR ETF (XLE), which represents the S&P 500 energy stocks, fell 22% in 2018. So, though the top oil stocks fell, they outperformed the sector in 2018. So far in 2019, ExxonMobil, Chevron, and EOG Resources are up 13%, 9%, and 5%, respectively. ConocoPhillips is down 2%.

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