According to the report of Japan Economic News on January 15, it is estimated that the U.S. crude oil production in 2018 leaped to the top in the world after 45 years. Driven by shale oil, U.S. crude oil production has more than doubled in 10 years, while dependence on imports has fallen to its lowest level in 30 years. The United States had previously relied on the Middle East in terms of crude oil supply, but as its production increased, its active participation in Middle East affairs might also decline. On the contrary, the “U.S. priority” foreign and security policies would be strengthened. The transformation of the United States into a net exporter of crude oil that exports more than imports is also imminent, and the world’s energy geopolitics may change.
Estimates from the U.S. Energy Information Agency (EIA) and industry show that crude oil production in the United States averaged about 10.9 million barrels a day in 2018, an increase of about 20% over the previous year. The United States ranked third in 2017, but Saudi Arabia, which surpassed second in September 2018, and Russia, which ranked first, changed their power structure completely. Shale oil is still profitable below $50 a barrel because of the lower cost of technological innovation.
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The structure of the U.S. dependence on foreign oil is changing as production increases. Net imports minus exports of crude oil account for less than 30% of U.S. domestic consumption in 2018, which is likely to reach the lowest level since 1988. This proportion hovered between 4 and 50% after the mid-1990s, when demand expanded significantly.
On the one hand, U.S. imports from the Organization of Petroleum Exporting Countries (OPEC) fell to about 50% of its recent peak (2008), the lowest level in 31 years. “The importance of the Middle East has declined and will no longer interfere in Middle East affairs at any cost,” said Takeshi Ueno, a senior economist at Japan’s Hiroshi Foundation Research Institute.
One of the reasons why the United States has long played the role of “world police” is to ensure a stable supply of energy. The fourth Middle East War in 1973, when the decline in domestic oil resources became evident, led to the oil crisis, which struck the world economy as prices rose rapidly.
To this end, in the Middle East, which is heavily dependent on crude oil, the United States led actions to maintain regional order, such as the 1991 Gulf War. But in December 2018, the United States announced its withdrawal from Syria, where the civil war is still ongoing. From the point of view of energy security, the active participation of the United States in Middle East affairs has significantly weakened.
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On the other hand, the United States banned crude oil exports because of lessons learned from the oil crisis, but lifted the ban in 2015. After that, the export of crude oil expanded rapidly. By the last week of November 2018, its exports expanded to the fourth largest in the world after Saudi Arabia and Russia.
There are many opinions in the market that the sense of existence in the United States will be a factor to pull down the market. Lotte Securities commodity analyst Jeshi Yoshida said, “OPEC’s”magic power”of raising prices through production cuts will be weakened”.
The world crude oil market is hovering around $50 a barrel. If the United States maintains its output growth at a faster than expected rate, it will restrain the rise in oil prices (Takashi Noguchi, chief economist of Japan’s Petroleum, Natural Gas and Metal Mineral Resources Agency), which may shake the ruling foundations of Russia and the Middle East, which are financially dependent on crude oil revenues.
U.S. exports of crude oil and petroleum products exceeded imports once a week in November 2018, and net exports for the first time since 1991, which can be traced back to the same standards. Shale oil production fluctuates due to the financing environment, but Daniel Eugene, a well-known analyst, predicts that by the early 1920s, [the United States] will also become a net exporter throughout the year.
Trump’s political power struggles to gain new hegemony by taking the world’s energy supply as its source. U.S. crude oil import and export revenue and expenditure in 2017 was negative 110 billion U.S. dollars. It accounts for 14% of the overall trade deficit in goods. The United States is considering reducing the trade deficit by expanding energy exports. The United States has become a net exporter of natural gas in 2017. The United States has begun to move from a big energy consumer to a big exporter, or will bring about changes in the world political structure based on resources.
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