Courtesy of the shale revolution, U.S. oil production has soared in recent years, even reaching its highest level since 1998 last year. The staggering growth in domestic production has helped sharply reduce U.S. oil imports, which fell to 8.5 million barrels a day last year — the lowest level since 1997.
But what this broad import data doesn’t show is that, even as total imports have fallen, the U.S. has become more reliant on just a handful of suppliers, especially Saudi Arabia and Canada. Let’s take a closer look.
Rising production, falling imports
According to annual data from the U.S. Department of Energy, U.S. crude oil production rose by 812,000 barrels per day last year, representing the largest annual increase since the birth of the U.S. oil and gas industry in the late 1850s. The growth in output was led by the nation’s two largest oil-producing states, Texas and North Dakota.
The majority of production from these states consists of light, sweet crude oil, which has a relatively low sulfur content and is less viscous than heavier grades of crude. As a result, U.S. Gulf Coast refiners have been able to slash their dependence on foreign imports of light, sweet crudes.
Plunging light oil imports
For years, they were forced to rely on light oil imports from Nigeria and Angola, OPEC’s two biggest West African members. But since July 2010, imports of Nigerian crude have fallen by about half, according to the U.S. Energy Information Administration, while Angolan imports are down to less than 200,000 barrels per day, compared with an average of 513,000 in 2008.
Not surprisingly, some major U.S. refiners have stopped importing light oil from abroad entirely. For instance, Valero Energy Corporation (NYSE:VLO) recently said that it has replaced all imports of light oil with domestic substitutes at its Gulf Coast and Memphis refineries. And Phillips 66 (NYSE:PSX) recently announced that it will increase its domestic crude slate by 80% this year, as it seeks to capitalize on abundant domestic supplies.
But even as imports from countries like Nigeria and Angola have fallen dramatically, the concentration of U.S. crude oil imports from its five largest suppliers — Canada, Iraq, Mexico, Saudi Arabia, and Venezuela — rose to 72% of total U.S. net crude imports, the highest in 15 years, according to the EIA.
Rising heavy oil imports
Imports of mostly heavy crude oil from Canada and Saudi Arabia, in particular, have risen significantly. Last year, the U.S. purchased a record 2.4 million barrels of crude oil per day from its neighbor to the north, 8% more than the previous year, while Saudi imports soared to 1.4 million barrels a day, the highest level since 2008 and up 14% from the year earlier.