American Crude Oil Comes to Europe’s Rescue
The United States is surging exports of crude oil to Europe as the continent looks to curb Russian imports in the wake of the continued assault on Ukraine.
While much of the focus on Europe’s energy crisis has focused on natural gas – another sector where U.S. exports have played a vital role as Energy In Depth has previously noted – increased U.S. crude oil exports have also skyrocketed to help replace supply in Europe in 2022 as countries there look to secure reliable non-Russian sources.
“U.S. crude exports bound for Europe are close to 1.5 million barrels per day (bpd) so far in April, the highest in two years and one of the strongest months on record, said Matt Smith, lead oil analyst for the Americas at data provider Kpler. Most cargoes are carrying light sweet grades, he added, headed to European destinations including Spain, the United Kingdom, Denmark and Italy.”
This increased U.S. crude oil supply is predominantly coming from West Texas, where Permian production is projected to hit a new record of 5.1 million barrels per day, as Reuters explains:
“British refineries, which plan to phase out Russian oil imports by the end of the year, last month bought the largest volume of U.S. crude in two-and-a-half years, Eikon data showed. Most cargoes were U.S. light sweet oil, with at least a quarter delivering Midland crude, according to the U.S. Customs data. Spain is set to import a record 7 million barrels of U.S. crude in April, according to cargo tracking data, after a peak in March of nearly 6 million barrels.”
Yet Calls to Ban Crude Exports Continue
The news that the United States is increasing crude oil exports to support our allies in Europe hasn’t been welcomed by everyone Capitol Hill, however.
In late 2021, Rep. Ro Khanna (D-CA) urged the White House to propose a ban on crude exports, claiming that such a ban would increase supply here at home and lower gasoline prices. But industry analysts warned the policy would backfire. As the Federal Reserve Bank of Dallas explained in January:
“One important point this proposal overlooks is that the prices of gasoline and diesel in the United States are determined by their prices in global markets since the U.S. trades diesel and gasoline. Because a cessation of U.S. crude oil exports would lower the supply of oil in global markets and raise its price, one would expect global fuel prices, if anything, to increase as a result. Refiners can always sell these fuels abroad at their global price, so it makes no sense for them to sell for less in the domestic market.
“In other words, the prices of gasoline and diesel fuel in the U.S. would not be expected to decline and might actually increase, rendering the crude oil export ban not only ineffective, but also counterproductive. Thus, there is no reason to expect that U.S. consumers would benefit from such a ban.” (emphasis added)
Despite this, in April of 2021, four U.S. senators announced that they would be reintroducing legislation to ban U.S. oil exports. In a release, Senators Ed Markey (D-MA), Jeff Merkley (D-OR), Ron Wyden (D-OR), and Bernie Sanders (I-VT), voiced support for the Block All New (BAN) Oil Exports Act. Senator Markey, apparently was unaware of the Dallas Fed report, and said that “reinstating the oil export ban would protect American consumers.”
It’s clear that U.S. crude oil and LNG exports are saving Europe as the continent attempts to bolster its support for Ukraine and cut its energy dependence on Russian energy. Efforts to restrict these exports would simply be reducing much needed supply for our allies and cause prices spikes because of major gaps in the market.