Figures from the US Energy Information Administration (EIA) have revealed that in April 2020, the US became a net exporter of energy for the first time in 67 years, with gross US imports of energy reaching 22.8 quadrillion British thermal units (quads), the lowest figure since 1995. On one hand, this is a positive for the US energy sector and the Trump Administration, which has aimed to reduce the US’s reliance on importing energy produced overseas, and could help establish the US as a country capable of meeting its own energy needs, at least in the short-term.
On the other hand, there are more long-term concerns for the sector, as many of the trends that have contributed to the US’s increased reliance on domestic production, namely increasing geopolitical tensions, may dissuade countries from entering into large-scale energy trading agreements. Instead, the country may find itself stifling many of the economic opportunities that couldarise as the US finds itself with energy surpluses, and in search of international trading partners.
This is particularly true with regard to the US’s relations with China, as the US has sought to distance itself from, and limit trade with, the industrial giant. Chinese coal accounted for just 1% of US coal imports in 2019, while US exports of natural gas to China have plummeted from 17.2 billion cubic feet in 2016 to 6.9 billion cubic feet in 2019.
With uncertainty rife in the energy sector, triggered by both internal political will and external pressures such as the Covid-19 pandemic, it remains to be seen if this trend will continue, and whether this will benefit the US energy industry.
Rising crude oil exports
The most dramatic change has been in crude oil; while the US remained a net importer of crude oil, its net oil trade declined by 31% between 2018 and 2019, a fall of 4.1 quads, equivalent to around 1.9 million barrels per day (bpd).
This trend was driven by significant increases in domestic US crude oil production, lessening the country’s reliance on imports; US daily oil production increased from 5.4 million bpd in 2010 to 12.2 million bpd in 2019, according to the EIA. Additionally, the 2015 repeal of a ban on US crude oil exports by the Obama Administration, a moratorium which had been in place since 1977, led to a jump in crude oil exports; in 2014, US annual crude oil exports reached 128 million barrels, but by 2019, it had increased almost tenfold to over one billion barrels.
Strong petroleum production
The US has also seen increases in the production of petroleum products, those which are derived from crude oil, helping to establish balance within the US energy sector. India and the UK were among the main beneficiaries of this trend, with annual US exports increasing by 25.5 million barrels to 170.9 million barrels to India between 2014 and 2019, and by 19.3 million barrels to 122.4 million barrels to the UK over the same period.
Improved efficiency across the US petroleum sector contributed to this improvement, according to Deloitte, which noted in its 2020 oil and gas outlook that “investors are expecting increased efficiency despite slowdown”, and that in 2019 the US oil industry was characterised by “impressive volume growth, moderate capital spending, weak operating cash flows, and a patient investor base.”
Natural gas exports continue to grow
The US has been a net exporter of natural gas since 2017, and the EIA’s latest figures confirm that this trend has continued apace, with gross exports reaching 4.7 quads in 2019, a record high that was a 29% increase on 2018 figures. A key driver behind this trend has been relatively unstable gas import prices, which have encouraged US industries to look to domestic sources of natural gas, rather than relying on volatile international markets. The average import price of natural gas to the US fell from $5.30 per thousand cubic feet in 2014 to $2.54 per thousand cubic feet in 2019, cratering at just $2.24 in 2016. This trend was particularly severe in pipeline imports, from Canada and Mexico, with average import prices from these countries falling from $5.21 per thousand cubic feet to $2.44 per thousand cubic feet over the last six years.
Conversely, export prices have remained slightly more stable, only falling from $5.51 per thousand cubic feet to $3.64 per thousand cubic feet between 2014 and 2019, and a number of foreign countries were eager to buy US natural gas over this period. Exports to Mexico have jumped from 27.5 billion cubic feet in 2016 to 142.4 billion cubic feet in 2019, while Japanese exports climbed from 11.1 billion cubic feet to 201.1 billion cubic feet across the same period.
Slight increase in net coal imports
The US’s balance of coal exports, however, did shift slightly, with gross exports of coal falling 19.7% between 2018 and 2019. While the US remains a net exporter of coal, as it has been since 1949, the country is struggling to find as many trading partners as it once did, with the drive to self-sufficiency championed by the US being adopted by other countries. In the first eight months of 2018 alone, Indian domestic coal production increased by 9.8%, and five power plants with “critical” and even “super critical” coal resources found themselves with healthy reserves by the end of the year, according to Energy World .
This trend was replicated around the world, suggesting that this is not the result of US policy in relation to a single country, but of a wider change in the energy sector. US coal exports to Asia fell 19.4% between 2018 and 2019, while North America and Europe imported 24.1% less US coal over the period. There were also a number of extreme examples, such as Panama, which saw its imports of US coal collapse by 99.5% over just one year, and while these are extreme outliers, they are indicative of a broader shift away from reliance on international trade to meet energy need.