In recent years, the US has been importing roughly 400 million barrels of oil and products each month. The monthly totals have ranged between 450 million barrels and 340 million depending on shipping schedules, demand, and weather – particularly hurricanes. Roughly half of these 400 million barrels have come from four countries – Canada, Mexico, Venezuela, and Nigeria.
Imports from three of those countries are now in danger of becoming much smaller in the foreseeable future and even the steady growth we have been seeing in Canadian exports to us is likely to erode soon. The most immediate concern is that Mexico, which had been exporting 50-55 million barrels per month to the US, is down to 37 million and will continue to drop steadily in the foreseeable future due to imminent depletion of its giant Cantarell oil field.
Venezuelan production is more of a political problem. In recent years Caracas had been sending us roughly 50 million barrels a month. That number is now down to the low 30’s and is likely to go lower as mismanaged Venezuelan production drops and President Chavez pursues his political goal of exporting as little oil to the US as possible. In recent years Chavez has been obligating increasing amounts of oil to China, Cuba and other politically friendly countries. Exports to the US are virtually certain to continue dropping for the next few years.
The insurgency in Nigeria is continuing to take a toll on exports to the US. In recent weeks the government has gone on the offensive to destroy the insurgency. In return, the militants are methodically working to destroy all of the government’s capacity to export oil. However an increasing share of Nigerian production is coming from offshore fields which are difficult, but not impossible, to attack. Nigerian exports to the US, which had been running from 35 to 40 million barrels a month, have become erratic as various pipelines are blown up and repaired. In some recent months, exports to the US have dropped below 20 million barrels.
Prospects are not good. Remote pipelines and production facilities are impossible to defend and government attacks on rebel villages which killed civilians have only increased hatred for the government. For now the outlook is for continuing militant sabotage and slowly falling exports.
Canadian exports obviously do not have political or insurgent problems, but will be increasingly affected by the economic slowdown. As production from Canada’s conventional oil fields continues to decline, an increasing share of Canadian exports come from the expensive-to-produce Alberta tar sands. The last six months have seen widespread cancellations and delays in new tar sands projects as oil prices dropped. To justify investment in new production facilities, prices must now be in excess of $90 a barrel to make economic sense.
While someday prices will return to those levels and continued economic troubles will lower development costs, for now very little new development is underway. At a minimum, increases in production from the sands have been set back many months or possibly years. This suggests that there will be a modest decline in exports to the US in the next few years.
Unless there is a substantial drop in US oil consumption, America is certain to become increasingly reliant on Middle Eastern oil.