Net Exporter, Still Importing
Key Extract
The United States exports more energy than it imports overall, yet its refineries still need millions of barrels of imported crude each day. The reason lies in the difference between light domestic oil and the heavy grades many refineries were built to process.
Two more tankers were attacked near Hormuz on Sunday. On the other side of Arabia, Saudi-backed forces and the Houthis are fighting for control of Yemen's coast and the Bab el-Mandeb.
Both shipping lanes out of the region are under fire at the same time.
A question we hear a lot: so what? Isn't the US a net energy exporter?
On net, yes. The devil is in the details...
THE QUICK LESSON
The US is producing nearly 14 million barrels of crude a day. Last week we still imported 6.8 million barrels a day.
Why import oil when we're producing record amounts? Because crude isn't one product. Most of what we drill is light and sweet. EIA's breakdown showed more than half of Texas production on the light end, while most imported crude was heavy. Many US refineries were built to run heavy, sour crude, and that's why the US is still a net importer of crude oil itself.
Think of a refinery like a kitchen built around one recipe. Run it on light crude alone, and the expensive equipment designed to turn heavy oil into diesel sits underused. So refiners blend light domestic barrels with heavier imported ones to hit the balance the plant was built for.
“Net exporter” is an accounting line. Count barrels in and barrels out, and we come out ahead. But it doesn't tell you whether the right barrels can reach the right refineries.
In a transportation crisis, that's the part that bites.
The Gulf supplies a lot of the heavier grades the world's refiners rely on for diesel. When Hormuz and the Red Sea route are both under fire, those grades get scarce, and refiners built for them compete for what's left.
Our refineries included. On a side note, that's why certain crude in the US (ours included) gets a bit of a premium, since it has the hydrocarbons needed for diesel.
So now you know, where we stand...better than others but not undisturbed if the blockade continues for much longer.
NEXT WEEK
We're turning to natural gas. It's the commodity surface-level analysts tend to skip, and winter pricing is taking shape right now.
We'll also share some good news from our own lease on the gas side.
Your Oil and Gas team,
Crown Forge Energy