According to Citigroup’s head of commodities research, Edward Morse, the U.S. will stop importing West African light, sweet crude into the Gulf Coast by the second quarter of this year. And before mid-2014, he added, the U.S. and Canada will terminate West African crude imports altogether.
The shifting dynamics of U.S. crude oil supply are nowhere more evident than in the recent earnings data for some of the major Gulf Coast refiners. For instance, Valero Energy Corporation (NYSE:VLO) announced that it replaced all imports of light oil with domestic production at its Gulf Coast and Memphis refineries.
Similarly, Phillips 66 (NYSE:PSX) recently said that it will be increasing its domestic crude slate by 80% this year, as the recently spun-off refiner seeks to capitalize on cheap and plentiful supplies of domestic light oil. Going forward, this trend is expected to accelerate, as new pipelines provide additional capacity for crude to be transported from plays like the Eagle Ford and the Permian Basin to Gulf Coast refineries.
Persian Gulf imports remain high
However, imports from Saudi Arabia – which produces heavier grades of oil – increased by 171,000 barrels over the course of last year. In fact, the U.S. was more reliant than ever on the Saudis last year.
Data show than by the end of November, it imported more than 450 million barrels of oil from the Middle East nation, which is more than it imported from them in the three preceding years.
For the first time in nearly a decade, Saudi imports made up more than 15% of total U.S. crude imports, while imports from the Persian Gulf accounted for more than a quarter.
U.S. role in Middle East security and final thoughts
Despite the widely heralded success of America’s shale revolution and the consequent reduction in light oil imports from other OPEC nations, these data points highlight America’s potential vulnerability to Saudi oil and raise some important questions about its role in the region’s security.
At the Munich Security Conference early last month, Carlos Pascual, coordinator for international energy affairs at the U.S. State Department, reaffirmed Washington’s commitment to peace, stability, and security in the Middle East.
While he acknowledged the tremendous benefits brought about by the domestic shale revolution, he highlighted the globally determined nature of oil prices, saying: “We’re dealing with global commodities … When there is instability or insecurity in any part of the world, it drives up the global prices of those commodities, and we pay for it at the pump.”
The article Do We Still Need Saudi Arabia With Record U.S. Oil Production? originally appeared on Fool.com and is written by Robert Arjun Sreekumar.
Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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