This Is Why the U.S. Can’t Use the Oil It Produces

as of 2023 the US was number one in the whole world for oil production quite impressive on average the country extracts around 19. 4 million barrels a day in second and third places in the rankings with a noticeable Gap are Saudi Arabia and Russia their figures are around 11 million barrels a day which is almost half of what the US produces but at the same time the USA is in second place among the key oil importers that is they actively buy it only China buys more crude oil around 10 million barrels a day while the USA's number is about 6 million barrels A Day Canada Mexico Guyana and again Saudi Arabia Supply oil to the US daily in fact there's a pretty long list give or take 15 countries and there's nothing unusual about it it's a big country that doesn't have enough oil of its own and has to buy it from others after all the USA is the biggest oil consumer in the world in 2019 the country consumed about 21 million barrels a day that's 20% of the global total 21% for one country but what if I told you that at the same time the USA sells a huge amount of oil that it extracts on its own land moreover the USA is among the top four largest oil exporters meaning they sell a lot of crude oil the country ranks forth after Saudi Arabia Russia and Iraq and sells about 3. 6 million barrels of oil each day and this already seem strange why sell oil if you don't have enough and end up having to buy it later what's up with that the truth is the us simply can't use its own oil and I won't make sense of it without a cup of coffee just an unobtrusive reminder to hit the like button if you do that sort of thing in 2022 when oil and gas prices in the US began to soar many people saw a straightforward and apparently obvious solution to the issue the US has roughly 38.

2 billion barrels of known oil Reserves underground that remain untapped judge for yourself almost 14 million acres on land and over 9. 1 million Acres at Sea are currently leased but not used for oil extraction so why not just extract all that oil prices would go down right away and everyone would be thrilled however even though this thought might seem really smart many experts back then said it was just a fantasy for the us to start fully exploiting and using its own oil that's just impossible moreover a weird par Paradox has come up even if the US were to extract all its oil the price of fuel wouldn't change at all why for the same reason that the US can't use its own oil they can only sell it a few years back the US set a record for domestic oil production and it's just kept growing since in 2018 for example the country's oil trade balance was the best it's been in the past 50 years moreover the US already produces enough oil to meet their needs so in 2020 the US was producing 18. 4 million barrels of oil per day and consuming 18.

12 million barrels so there could have been some left over for the future but how does such a huge import fit into this scenario to get to the bottom of it you need to grasp one very important thing while oil is a major commodity traded globally nearly no one uses it directly oil needs to be processed into fuels materials and products that we rely on every day just a barrel of oil isn't much use to anyone however it's physical characteristics like where the oil is extracted where the refineries or production facilities are located or where the highest consumer demand is affect its usefulness and therefore its value yes oil also comes in different types types of oil differ in density sulfur content viscosity presence of impurities and all that sort of thing depending on what exactly you want to produce you need a certain type of oil with specific characteristics based on these characteristics people decide what to do with the oil they've extracted but if you really want to put it simply you can roughly divide oil into light and heavy types the type of light crude oil that most people are familiar with is less dense than water it flows easily at room temperature heavy oil and bamin are also forms of crude oil but they're more viscous and dense all these differences in oil chemistry mean that you can't purify all oil the same way the purifying processes look different depending on the type we've more or less figured out the oil situation but let's go back to the US and look at at the conditions here it just so happens that most of the infrastructure for oil extraction as well as refining and transporting fuel is located in the regions in the middle of the continent and along the Gulf of Mexico Coast by the way this is the reason why the five states where fuel prices are the lowest are the same ones where most of the infrastructure is located these are Mississippi Oklahoma Tennessee Alabama and of course Texas Believe It or Not oil pipelines have been around since the 1860s back then of course pipes were out of the question question wagons and flat boats were the most common means of transporting barrels of oil but the industry needed something better in 1862 a more modern pipeline was built which looked well nothing like what we have now two wooden planks joined in the shape of a v this pipeline carried oil about 1,000 ft using simple gravity however by 1863 an actual iron pipeline was laid in Pennsylvania stretching 2. 5 Mi and equipped with pumps and after that there was no stopping it even even today many states with high demand for motor fuel don't have such modern infrastructure instead they get fuel through shipping railroads and trucks in other words any way they can but not through pipelines but of course most of the raw oil in the US which is transported over long distances goes through pipelines in 2014 there were almost 160,000 Mi of Interstate pipelines in the United States and still they don't reach everywhere for example let's take California a state with the highest population there are more more people here than in the 21 least populous states combined pretty clear comparison right even with its population California is practically an oil Island it has no pipelines linking it to other crude oil producing and refining regions in addition to its own oil which isn't very much California Imports roughly 70% of its crude from abroad the portion coming from other states is very minimal why did this happen well actually it's very complicated let's just say it's about geography and political decision at the state level it's likely that California will never be connected to the main oil pipeline of the United States simply because the cost of such a project would be very high and there's no certainty that oil will be needed after all this is California states in the process of transitioning from internal combustion engines to electric vehicles what's the point of oil but let's get back to the main question why doesn't the US use the oil it drills it turns out it's actually quite simple the country has resered deserves of light oil but it needs heavy oil turning heavy oil into high quality products needs more advanced molecular processing that's why heavy oil is generally valued lower than light oil it costs a lot to make it useful for instance a few years back the average price for heavy oil was $54 per barrel while for light oil it was just over $70 per barrel however many American oil refineries are generally set up to process heavy crude oil this is because a long time ago the US built its indust industry to handle just heavy oil back then it helped to expand resources and Supply potential the refineries were literally designed to process oil coming from Mexico and Venezuela and a large portion of it usually relatively heavy and with a relatively high sulfur content but the country's own oil is actually light so how about modernizing the refineries well no as of January 1st 2024 there were 132 active oil refineries in the USA modifications to individual refineries cost between $50 and $100 million and a complete overhaul of the entire plant can cost several billion dollar in short it's easy to calculate that modifying all the plants will cost at least $130 to $200 billion in practice the amount will likely be much higher due to various accompanying factors no one's just going to spend such huge amounts of money and not just because it's insanely expensive but because of the current government policy it's aimed at reducing oil extraction and consumption the US is working towards a gradual shift away from fossil fuels so institutions are pulling out of the industry Investments are being cut back in short all this costly plant modernization is just not needed by anyone so it turns out that buying someone else's oil is just more profitable than using your own it seems strange but right now by selling their own oil and buying and then refining someone else's the US makes more money than with any other strategy imported oil even after subtracting transport expenses is often less expensive than oil extract domestically the primary reason is the cost of extracting oil in other countries it's much lower than in the USA this cost covers land prices leasing labor in short in the USA everything costs a lot more but that's not the only reason there's also the Jones Act of 1920 which requires that Goods shipped from one Us Port to another be transported on ships that are built owned and manned by Americans do you see the problem here essentially getting oil from Texas to the east coast of the US is quite possible yet oil from Texas goes to Asia and the East Coast gets its oil from across the Atlantic the reason for these odd routes comes down to cost because of the Jones act requirements shipping fuel from the Gulf of Mexico to the east coast cost three times more than shipping it from overseas and this is considering the widely developed Port infrastructure that allows using cheap sea transport but alas the law is the law and now let's imagine what would happen if the US decided to use only its own oil from now on it seems this would immediately lead to a bunch of problems even without considering how much money it would take to readjust the refineries switching solely to light crude oil might not cover some markets and the hundreds of billions of dollars invested in heavy oil processing would just be lost equipment would no longer be needed in fact there was even a survey of energy experts and almost 2/3 of the respondents said that energy Independence isn't a reasonable goal so if the US stops buying oil and uses only its own it won't lead to anything good if a miracle happened and American oil refineries could instantly start processing Local Light oil it would still result in huge expenses simply because this oil comes out of the ground in the wrong places so there's just no infrastructure to get the oil to the refineries and without it all the extraction for local use becomes pointless but here's the interesting part in the US there's its own heavy oil and so-called oil sands mainly in California Alaska Utah however extracting and processing them requires more energy and water than lighter oil and again it's simply more expensive plus there's too little of this oil about 10% of the total amount and it just won't cover the demand if there were enough deposits it would still be more expensive to develop them than to buy foreign oil and it's not just about the money it would take a ton of time too building the necessary drilling rigs takes at least 2 or 3 years also extractions not the quickest thing after filling start you can see the oil in about 6 months or even up to 8 and it's needed all the time in large quantities so what do we have in the end just stopping buying oil and building all the necessary extraction facilities won't work the reserves will run out the country will grind to a halt collapse fuel apocalypse starting to build installations in advance and transitioning gradually is too expensive and with the rise of green energy it might even be pointless all for the sake of bears in April of this year the US banned drilling for fossil fuels on almost half of the territory of the National Petroleum Reserve in Alaska this measure is aimed at protecting the environment as the area under the band is home to protected species such as polar bears and Caribou although it's exactly here that the Navy's underground emergency oil Reserve is located which was established in the early 1920s but still protecting the environment one out the decision to introduce a drilling band sparked both criticism and approval and at the same time the realization that everything is constantly changing even old oil sources can suddenly become off limits what sort of plant overhaul are we even talking about us in first place according to stats in 2023 the US produced more oil than any other country in any other year on record it's clear that with the advancement of Technology the oil industry is also growing and there's a rising Demand on on top of that but the states keep breaking records as a result in August 2024 oil production in the US reached 13.