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Surpluses shrink vast trade deficits
Question of the Day
Even as big U.S. oil companies call for an end to a 1970s-era law banning exports of crude, they are exploiting a loophole that last year enabled them to export record amounts of gasoline and other petroleum products.
The loophole allows oil companies to export products that they refine from crude oil, though not the crude itself. With a major surplus of high-quality crude extracted by shale oil wells from Texas to North Dakota — and a declining appetite among American drivers — the little-known provision has resulted in an unprecedented boom in petroleum exports that is drawing down chronic U.S. trade deficits for the first time in decades.
Exports of gasoline, diesel, distillate, propane and other petroleum products soared to a record 4.3 million barrels a day in December, more than twice the 2.1 million barrels a day of petroleum products that the U.S. imported on average last year, according to the Energy Information Administration. The average 3.5 million barrels of petroleum exports a day in 2013 was double the 1.7 million five years ago.
He said the U.S. is exporting gasoline primarily to Latin America and diesel to Europe. He expects the U.S. to become a net exporter of natural gas and petroleum by 2017. The U.S. already is exporting a lot of liquids that are produced as byproducts of drilling for natural gas, such as naphtha and condensates, he said.
“It’s a trade opportunity for the U.S.,” he told the Natural Gas Roundtable last week, although the rapid expansion of exports does raise questions about fuel costs for Americans because they will be competing with consumers overseas who generally pay higher prices.
Fuel prices in Europe are significantly higher than in the U.S., so lower-priced U.S. fuel is in demand. Countries in Central America, South America and Africa import gasoline and other refined products from the U.S. because their own refineries cannot meet growing demand for fuel. Mexico imports gasoline from the U.S. while exporting much of its crude oil to U.S. Gulf Coast refineries because they have the technologies and facilities needed to convert heavy crude into consumable products.
The stealth surge in petroleum exports drove down the U.S. current account deficit to $81 billion — the lowest in 14 years — in the final quarter of 2013. For all of last year, the trade deficit fell to $474.9 billion from $535.7 billion in 2012.
“The declining trade deficit is good news,” and it is largely because of rapidly growing exports of surplus petroleum products in the past five years, said Jerry Jasinowski, former president of the National Association of Manufacturers. “All of a sudden the U.S. energy picture — thanks to refinements in fracking technology — is much more robust than anyone thought possible.”
Because U.S. shale oil must be refined at factories on the Gulf Coast, East Coast or West Coast before it is sent overseas, the refining revival also has contributed in a big way to the rebound in U.S. manufacturing output, exports and jobs since the recession. Investment in oil- and gas-producing facilities has led all investment by U.S. businesses in recent years.
Moreover, the availability of inexpensive oil and natural gas has been an elixir for other U.S. manufacturers and exporters that are heavily dependent on energy, including plastics, chemicals and agriculture. As a result, the energy revival has fed a renaissance in manufacturing. That, in turn, has served to drive up U.S. exports of goods and services by 3 percent in the past year, helping narrow the trade deficit.
“The falling trade deficit is a clear confirmation of our competitive gains in both energy and manufacturing,” said Mr. Jasinowski.
Like Mr. Sieminski, he noted that the energy export boom has only begun. Construction is under way on several export terminals for liquefied natural gas, which the U.S. has the ability to produce in abundance as a result of the shale revolution.
“By 2016, we will probably be exporting more oil and natural gas than we import,” and will have achieved energy independence, he said.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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