President Donald Trump was wrong last week when he said that the U.S. doesn't need Middle East oil. For one thing, U.S. refiners still need to process it to make the products their customers want. What's more, America's car drivers and truckers need it to keep flowing or else they'll face higher prices at their local gas pump.
Trump made his assertion during an address from the White House after Iran launched a barrage of missiles at two air bases in Iraq used by the U.S. military and amid fears of an escalation in attacks on key oil infrastructure in the region, including potentially the flow of oil through the Strait of Hormuz — a narrow neck of water that connects the Persian Gulf to the open seas.
It's certainly true that very little of the crude produced in the Persian Gulf region now finds its way to refineries in the U.S. Less than 5% of the 16.5 million barrels a day of crude and condensate — a light form of oil pumped from gas fields — that flowed through Hormuz in 2019 went to American refineries, according to tanker tracking data compiled by Bloomberg.
By contrast, four Asian countries — China, India, Japan and South Korea — bought two-thirds of all the crude and condensate from the region. If you add in the rest of Asia, that figure rises to more than 80%. Little wonder then that Trump is calling on those countries to take a bigger role in protecting oil flows through the strait.
But the shipments to the U.S. cannot be dismissed so easily. Individually, the country is the fifth-biggest buyer of Middle Eastern crude. Of course its imports from the region have tumbled as domestic oil production soared with the shale booms, as shown in the chart below. But the countries of the Persian Gulf still account for 1 in 8 barrels of crude imported into the U.S.
As my Bloomberg News colleague Sheela Tobben has written, before the shale boom began, U.S. Gulf Coast refiners invested millions of dollars revamping their plants to process relatively cheap heavy crude from the Middle East and Latin America into the low-sulfur products demanded by local consumers. Since 2012, they have rejigged their facilities again to process higher proportions of the type of light, sweet oil (containing little or no sulfur) that is extracted from shale formations.
Much was made of America's oil independence when the country posted the first full month as a net exporter of crude and petroleum products since government records began in 1949. That became apparent at the end of November, when monthly data for September were published. The feat was repeated in October (the most recent month for which we have monthly figures).
But one shouldn't lose sight of the fact that this new status as a net exporter is driven by shipments of refined products. The U.S. continues to import more crude than it ships out. It is solidly linked into the global oil market and will remain so.
