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Monday, December 18, 2017

New US energy policy?

The recent statement by U.S. President George Bush to double strategic oil reserves by 2027 is good news for tanker owners - not so the statement that gasoline consumption will be reduced by 20%, which would mean a reduction of some 2 million barrels per day (mbd).

 

The U.S. imported 10.2 mbd of crude oil in November, and imports from Canada amounted to 2.1 mbd. Canadian oil by pipeline is increasing its market share in the U.S. Mexico appears to be having difficulty maintaining its level of production and is losing market share in the U.S. West African oil has been increasing its market share in the U.S., but both Nigerian and Angolan oil exports to the U.S. fell strongly in November. Saudi Arabia greatly increased its oil exports to the U.S. in November.

 

 

The U.S. slightly reduced oil imports in 2006 while domestic oil production reached about the same average level for the whole year as in 2005. During January 2006, however, it was some 0.2 mbd above the average production of the previous two years. However production has still not reached the high levels it achieved pre-hurricane in 2005 - some 5.4 mbd. Gasoline imports in January were 1.1 mbd, the highest ever for this time of the year.

 

The U.S. petroleum consumption pattern is unlikely to be changed by a statement from the President alone. The most effective way to reduce gasoline consumption would probably be to increase prices drastically, but that is unlikely to happen. Using more bio-fuel would contribute to reducing mineral gasoline consumption, but so far this is a marginal product. A switch by U.S. consumers to smaller or more fuel-efficient engines would also help but such a move is unlikely to be popular.

 

President Bush's statement is nevertheless significant as it indicates a recognition that something must be done to reduce the U.S. dependence on oil imports. Once this recognition is widely shared by the U.S. public, and incentives are provided to achieve Bush’s goals, the impact on both the U.S. and world oil consumption is likely to be considerable.

 

Contact: Erik Ranheim