7. OIL

mandated sales are completed. If the United States no longer holds a substantial level of SPR, there could be a challenge to the future effectiveness of the International Energy Agency (IEA) emergency response system, particularly in the case of a large collective action. At the same time, this rapid decrease in SPR volumes will free up storage space for possible joint stockpiling or commercial leasing, creating an opportunity for the United States to help other IEA member countries reach and/or maintain their obligation to hold oil stocks equivalent to 90 days of their net oil imports.

Figure 7.1 Share of oil in different energy metrics, 1978-2018

IEA (2019). All rights reserved.

The United States experienced a strong increase in domestic energy production between 2008 and 2018. Oil phased down to below 1% in electricity generation.

*Latest TFC data are for 2017. Note: TFC = total final consumption.

Source: IEA (2019a), World Energy Balances 2019, www.iea.org/statistics/.

Supply and demand

Crude oil production

Domestic oil production in the United States was 15.5 mb per day (mb/d) in 2018, a remarkable 124% increase from 2008, with LTO taking the largest share of total production (42%), followed by natural gas liquids (NGLs) (28%), conventional oil (24%), condensates (5%) and non-conventional oils1 (1%) (Figure 7.2).

The exponential growth of LTO is the main driver of the overall increase in oil production, jumping from an almost non-existent volume in 2008 to 6.5 mb/d in 2018. The production of NGLs has more than doubled from less than 2 mb/d in 2008 to 4.4 mb/d in 2018, while the production of condensates has increased by 65% from 475 thousand barrels per day (kb/d) in 2008 to 784 kb/d in 2018. The production of conventional oil has declined by 15% for the last ten years with 3.7 mb/d in 2018, and non-conventional oils have increased by around 29% over the same period.

1 Non-conventional oil includes synthetic crude oil from tar sands, oil shale, liquids from coal liquefaction, liquids from gas-to-liquids processes, hydrogenated and emulsified oils, refinery additives and methyl tertiary butyl ether (MTBE).

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7. OIL

The first wave of the domestic oil production boom that started in 2009 slowed down with a temporary fall in 2015-16, when global oil prices declined rapidly. During the downturn, oil and gas companies optimised their portfolios and cut exploration and production costs. Oil production picked up again in 2017, indicating a second wave of production growth that has continued up to the time of writing, reaching a historical high of 15.5 mb/d for total oil production in 2018. US crude oil production exceeded that of Saudi Arabia in February 2018 and that of the Russian Federation (hereafter “Russia”) in June 2018 (EIA, 2018a).

Figure 7.2 US domestic oil production, 2008-18

IEA (2019). All rights reserved.

Supported by more advanced and cost-effective drilling technology,

US oil production continues to break historical highs.

Notes: LTO and condensates are presented separately in Figure 7.2. Crude oil stated in the main text includes conventional oil, LTO, condensates, NGLs and non-conventional oils.

Source: IEA (2019b), Oil Information 2019, www.iea.org/statistics/.

Crude oil is produced in 32 states and coastal waters (predominantly the Gulf of Mexico). In 2017, the top producing states were Texas, accounting for around 38% of total domestic crude oil production, North Dakota (11%), Alaska, California and New Mexico (each 5%). Crude oil produced from offshore wells in the federally administered waters in the Gulf of Mexico would rank second (18%) if the area were a state (EIA, 2018b).

While the level of domestic production is still below oil demand, the gap between oil supply and demand has halved over the last decade, and oil import dependency dropped from 65% to 25% (Figure 7.3) between 2008 and 2018. The country lifted its 40-year-old ban on crude oil exports in late 2015 (Box 7.1). The United States exported 2.5 mb/d of crude oil in 2018 to 42 destinations (see section on Outlook of Oil Supply and Demand).

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IEA (2019). All rights reserved.

Since 2008, oil import dependency has more than halved to 25%.

Source: IEA (2019b), Oil Information 2019, www.iea.org/statistics/.

Box 7.1 Suspension of 40-year-old ban on crude oil exports

Prior to 2015, US law and regulations required that a company must obtain a licence from the Bureau of Industry and Security (BIS) of the US Department of Commerce to export crude oil. While crude oil export licences were reviewed on a case-by-case basis, select categories of transactions were generally approved as in the national interest, including from Alaska’s Cook Inlet, California heavy crude (up to 25 000 barrels per day), exports to Canada, exports related to refining or exchange of SPR oil, exports consistent with international energy supply agreements, and re-exports of foreign crude. Additionally, the BIS approved that condensate processed through a distillation tower be classified as a “petroleum product” instead of crude oil, which was exportable without a licence.

In December 2015, Congress voted to lift the 40-year-old ban on crude oil exports. This policy change has brought significant changes to the global oil market landscape. It boosted the market for light, sweet crude pumped out of US shale deposits, increased the productivity of global refiners as a wider variety of oil became available and consolidated the position of West Texas Intermediate (WTI) as a global benchmark.

Sources: EIA (2015), Effects of Removing Restrictions on U.S. Crude Oil Exports www.eia.gov/analysis/requests/crude-exports/; EPA (2014), U.S. crude exports in April rise to highest level in 15 years, www.eia.gov/todayinenergy/detail.php?id=16711 .

Refined oil products

In 2018, the United States processed 17.0 mb/d of crude oil and produced 19.0 mb/d of oil products. Over the last decade, the gross volume of refining outputs increased by 5%, with gasoline accounting for the largest share, but the total supply of oil products still could not cover total demand of 21 mb/d (Figure 7.4).

In 2018, liquefied petroleum gas (LPG) – mainly propane and butane – ethane and gasoline showed considerably higher demand over domestic supplies, which were

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