President Donald Trump said during an address from the White House Wednesday that the U.S. no longer needs oil from the Middle East, but American refineries still use the kind of oil that region produces.
Thanks to booming shale production, the U.S. reduced shipments from the Persian Gulf to a 30-year low last year. Still, Middle East crude makes up more than 10% of U.S. imports. With new oil production records being set in the Permian Basin, the country’s energy growth engine, America’s thinning reliance on Middle East crude isn’t about to reverse course.
Before the “shale revolution,” as American drillers call it, Gulf coast refiners invested millions of dollars to process relatively cheap heavy oil from the Middle East and Latin America. At the same time, shale oil is much lighter and lower in sulfur compared with supply from the Persian Gulf, and not ideal for most American refineries.
Sources of heavy crude supplies have already been limited since the U.S. levied sanctions on Venezuelan oil, declining Mexican production and Canadian logistical constraints. With sanctions already on Iran, buyers are still dependent on other Persian Gulf producers.
© 2020 Bloomberg L.P.