This site uses cookies. By continuing to use this site you agree to our use of cookies. To find out more, see our Privacy and Cookies policy.
Skip to the content

[IOP] A community website from IOP Publishing

environmentalresearchweb blog

Do the math – no, the U.S. can’t punish Putin by exporting oil and gas

Since Russia has taken over the Crimea region of Ukraine, there have been several news articles written regarding the supposed ability of the United States (U.S.) to use our oil and/or natural gas as some sort of geopolitical weapon.  This weapon would somehow hurt Vladimir Putin (not Russian citizens) and probably help the Europeans and Ukrainians that buy natural gas from Russia. I link here a recent Bloomberg article (March 25, 2014) that is an example of an article that does not ask the most relevant questions on this topic. By not asking relevant questions and not using relevant data, the public is not being properly informed.

Here’s what we need to do: do the math.

I encourage all pundits and journalists to “do the math” on these types of energy questions (I take this from physicist Dr. Tom Murphy of UC San Diego and his “Do the math” blog that assess energy options).  One great way to “do the math” is to use the treasure trove of energy data that is provided by the U.S. Energy Information Administration (EIA).  The EIA has done a tremendous amount of work to make data easily available to the world. Let’s show them some appreciation and use it (and make sure our government understands the value of continuing these and more data series).

 

On the topic of U.S. oil and gas exports in the context of Russia, here is one excerpt from the recent Bloomberg article:

“The once-unthinkable idea of exporting large amounts of U.S. oil and natural gas has gained support as advances in drilling techniques leave the U.S. poised to surpass Saudi Arabia and Russia as the world’s largest producer of crude by 2015, according to projections by the International Energy Agency. In November, the U.S. produced more oil than it imported for the first time since 1995.”

 

The problem with these statements is that they are not sufficiently relevant, by themselves, to enhance our understanding regarding the issue of the U.S. exporting oil (or natural gas) to other countries. The fact that the U.S. produces more oil than it imports tells us nothing about the relevance of exporting oil because it does not describe how much oil we import and export.

 

Here is a more relevant question (there are others) on the subject of the U.S. to help Europe by selling them oil and/or natural gas to prevent them from buying it from Russia.  Let’s assume that there is a geopolitical benefit to reducing European purchases of Russian natural gas and/or oil:  

Can the U.S. direct our oil and gas exports to Europe (or Ukraine) to help?

In the short term: No, because the U.S. does not have excess natural gas or oil to sell.

In the medium to long term: Only if the U.S. has excess natural gas or oil to sell. There is a chance the U.S. could be a net exporter of natural gas within a decade, but almost no chance for becoming a net exporter of oil.

 

In the short term:

It is practically impossible for the U.S. to have any significant impact on Russia in the short term because today the U.S. is still a net importer of natural gas and oil.  Yes, the U.S. is still a net buyer of both natural gas and oil from the rest of the world – not a net seller to the world.

See EIA data showing that NG imports (see here for EIA data) are greater than NG exports (see here for EIA data). For example, the EIA data for 2013 show 1572 billion cubic feet of exports and 2883 billion cubic feet (Bcf) of imports, meaning that despite all of the shale gas production, the U.S. is a NET IMPORTER of natural gas (mainly via pipeline from Canada) of 2,883 – 1,572 = 1,311 Bcf/yr.

Regarding the idea of sending natural gas to Ukraine, the Ukrainians imported 1,162 billion cubic feet (Bcf) of natural gas in 2012 (see here for EIA data). So currently, the U.S. net imports 2,883 – 1,572 = 1,311 Bcf/yr, which is about the same quantity of Ukrainian NG imports (1,162 Bcf in 2012)!

 

So where is the “extra” NG in the US?

Short term answer:  At the moment, the U.S. does not have “extra” natural gas production to send to anyone. Despite the technological advance of hydraulic fracturing to boost natural gas production, the U.S. would have to reduce NG consumption in order to send LNG to Europe or Ukraine. But first, we need to actually build the infrastructure to export our currently non-existent excess natural gas supply. This takes us to the longer-term question …

 

What about displacing Russian oil and/or gas exports in the medium to long term?

Considering NG:  If the U.S. does not export natural gas today, might the U.S. export natural gas in a few years?

In 2013 U.S. dry natural gas production was just over 24 trillion cubic feet, higher than it has ever been. And as already noted, because we here in the U.S. consume so much natural gas, we still imported a net quantity (e.g. we still consumed more than we produced in 2013). Future production, consumption, and import/export levels depend on many factors making them difficult to predict. However, the 2014 (early release) Annual Energy Outlook by the Energy Information Administration shows a reference case with the U.S. being a net exporter of natural gas before 2020.

Only time will tell if the U.S. exports more natural gas than it imports, but there are two sides to the “net export” coin (that can occur in combination): (1) production can increase more quickly than consumption (e.g., constant consumption rates) and (2) consumption can decrease more quickly than production (e.g., with constant production rates).

 

Considering oil:  If the U.S. does not export crude oil today, might the U.S. export crude oil in a few years?

While the U.S. currently imports a small share of total natural gas consumption, for crude oil this is an entirely different story. The U.S. is still a net importer of a large share of crude oil consumption. The EIA weekly statistics for March 21, 2014 show the U.S. importing 7.6 million barrels per day (MMBBLD) of crude oil while exporting 0.064 MMBBLD for total net imports of 7.6 MMBBLD of crude oil.  The U.S. converts this crude oil into “refined products,” such as gasoline and diesel fuel, and is a net exporter of these refined products of 1.9 MMBBLD as of the March 21, 2014 data. If we make the (simplistic) assumption that a barrel of oil and a barrel of refined products are equivalent, then we can subtract the net exports of refined products from the crude oil net imports to approximate the net petroleum imports to the U.S.:

7.6 MMBBL net imports of petroleum (as crude) – 1.9 MMBBL net exports of petroleum (as refined products) = 5.7 MMBBLD of net imports of petroleum.

Given 18.3 MMBBLD of petroleum “supplied” in the EIA weekly data for March 21, 2014, I can estimate that the U.S. imports approximately 31% = (5.7 MMBBLD net imports)/(18.3 MMBBLD consumption) of total consumption. The same EIA Annual Energy Outlook 2014 that projects the U.S. might be a net exporter of natural gas by 2020 does not project the U.S. will ever be a net exporter of crude oil.  Thus it looks very unlikely the U.S. will ever have “extra” oil.

 

So, if the U.S. is a net importer of petroleum, can we export crude oil to offset European (or Ukrainian) imports from Russia? No.

If the U.S. did export crude oil to Europe it would create the cliché situation of “robbing Peter to pay Paul”. I demonstrate using the following equation for comparison:

Gross Import – Gross Exports = Net Imports

 

Here is the U.S. oil situation “today”:

~Today (units in MMBBLD): 7.6 – 1.9 = 5.7 of net imports

 

What if “tomorrow” the U.S. exported 1 MMBBLD of crude to “help” Europe and Ukraine and kept our consumption constant?

“Tomorrow” (units in MMBBLD) =   8.6 – 2.9 = 5.7 of net imports

 

“Do the math”:  the U.S. still net imports 5.7 MMBBLD of oil from the world oil market (perhaps taking 1 MMBBLD more from Russia)!

 

Further reading on this topic: See Gail Tverberg’s blog here on The Absurdity of US Natural Gas Exports.

About Carey King

Dr. Carey W King performs interdisciplinary research related to how energy systems interact within the economy and environment as well as how our policy and social systems can make decisions and tradeoffs among these often competing factors. The past performance of our energy systems is no guarantee of future returns, yet we must understand the development of past energy systems. Carey’s research goals center on rigorous interpretations of the past to determine the most probable future energy pathways. Carey is a Research Scientist and Assistant Director at the Energy Institute at The University of Texas at Austin, and appointed also at the the Center for International Energy and Environmental Policy within the Jackson School of Geosciences and Business, Government, and Society Department of the McCombs School of Business. Visit his website at: http://careyking.com and follow on Twitter @CareyWKing
This entry was posted in Energy the nexus of everything and tagged , , , , , , . Bookmark the permalink.
View all posts by this author 

One comment to Do the math – no, the U.S. can’t punish Putin by exporting oil and gas

  1. francesco

    The US do not have to become net exporter to affect the world oil or gas market. They have excess oil even if they are net importer becouse the ban on national resource export on the crude side. In fact they are net exporters of products. The bottleneck created by the huge increase of domestic production made the prices of gas (henry hub) and oil (wti) cheaper then other world benchmarks (NBP; BRENT , DUBAI…). If US allow export the prices should align so energy in Europe cost less. However this will reduce the advantage for the US industry and that’s the reason why they won’t do it!!

Leave a comment

Your e-mail address will not be published.

Guidelines

  • Comments should be relevant to the article and not be used to promote your own work, products or services.
  • Please keep your comments brief (we recommend a maximum of 250 words).
  • We reserve the right to remove excessively long, inappropriate or offensive entries.

Show/hide formatting guidelines

Tag Description Example Output
<a> Hyperlink <a href="http://www.google.com">google</a> google
<abbr> Abbreviation <abbr title="World Health Organisation" >WHO</abbr> WHO
<acronym> Acronym <acronym title="as soon as possible">ASAP</acronym> ASAP
<b> Bold <b>Some text</b> Some text
<blockquote> Quoted from another source <blockquote cite="http://iop.org/">IOP</blockquote>
IOP
<cite> Cite <cite>Diagram 1</cite> Diagram 1
<del> Deleted text From this line<del datetime="2012-12-17"> this text was deleted</del> From this line this text was deleted
<em> Emphasized text In this line<em> this text was emphasised</em> In this line this text was emphasised
<i> Italic <i>Some text</i> Some text
<q> Quotation WWF goal is to build a future <q cite="http://www.worldwildlife.org/who/index.html">
where people live in harmony with nature and animals</q>
WWF goal is to build a future
where people live in harmony with nature and animals
<strike> Strike text <strike>Some text</strike> Some text
<strong> Stronger emphasis of text <strong>Some text</strong> Some text