Declining reliance on oil from the Middle East

MARY REICHARD, HOST: Coming up next on The World and Everything in It: American oil independence. 

Almost 60 years ago, five oil-rich nations founded the Organization of Petroleum Exporting Countries, OPEC. Eventually 10 more nations joined to form the current 15 members. They include Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.

NICK EICHER, HOST: The goal of OPEC is to unify policy and production of oil to influence global prices. It functions as a cartel, ramping up or slowing down oil production to suit the political or economic goals of its members. 

Here’s an example of that: back in 1973 during the Arab-Israeli War, OPEC slapped an oil embargo on the United States to retaliate for U.S. support for Israel. 

Oil supply dwindled, price controls went into place, and as a result shortages and rationing happened all over the country.

REICHARD: And ever since that hard lesson, the United States has sought energy independence. 

And as WORLD Radio’s Sarah Schweinsberg reports, new numbers show good progress toward that goal.

SARAH SCHWEINSBERG, REPORTER: U.S. OPEC oil imports dropped to a 30-year-low in March. That’s according to a new report published by the U.S. Energy Information Administration. 

In the first quarter of this year, the U.S. imported 1-and-a-half million barrels of OPEC oil a day. That may still sound like a lot but it’s actually a 75 percent drop from a decade ago. 

Ramanan Krishnamoorti is the chief energy officer at the University of Houston. He says in the 1980s, the U.S. consumed on average 15 million barrels of oil a day. 

KRISHNAMOORTI: So we were producing five and importing 10.

Of that imported oil, 70 percent came from OPEC nations. That meant the U.S. relied on OPEC for about half of its daily oil supply. 

Krishnamoorti says both Republican and Democratic presidents have viewed this dependence as a national security threat.

KRISHNAMOORTI: Intrinsically, everything that the United States was doing in terms of its GDP growth was tied back to the price of oil. So anybody who could pull the levers on the price of oil could control the economic destiny of the United States. 

In the past, the U.S. tried to ramp up off-shore oil drilling to increase domestic supply but with limited success. 

KRISHNAMOORTI: We were using as much as we could find. And in 2005, we really were at our wits end as to where we were going to get additional production. 

Krishnamoorti says everything changed with the invention of a new technology: hydraulic fracturing—or fracking.

KRISHNAMOORTI: The shale revolution was what has transformed the production within the United States.

John Tintera is the president of the Texas Alliance of Energy Producers. He says fracking technology has allowed oil companies to extract oil and natural gas from previously unreachable shale wells. 

TINTERA: The type of oil and gas reserves that are causing the current oil boom in Texas are from unconventional reservoirs. Reservoirs that 20 years ago were not considered productive because the hydraulic fracturing technology did not exist. 

U.S. oil production has more than doubled in the past decade—surpassing Saudi Arabia and Russia. Texas alone has surpassed every OPEC member except Saudi Arabia. 

That increased U.S. production has prevented OPEC from driving the oil market like it used to. Since 2014, OPEC nations have actually scaled back production in an effort to push oil prices back up. 

John Tintera says U.S. oil production won’t be slowing down anytime soon. 

TINTERA: Texas produced more than 1.5 billion barrels of crude oil in 2018 and will likely exceed that amount in 2019. So with 293 billion barrels of recoverable reserves, that is a long lifespan. 

University of Houston’s Ramanan Krishnamoorti says the U.S. now only imports about one-third of its oil from OPEC.

KRISHNAMOORTI: We also figured out that our neighbors, particularly Canada and Mexico, were excellent companions to import from. In fact, what we import from Canada today, surpasses the import from OPEC by a factor of two.

Samantha Gross is a foreign policy and energy security analyst at the Brookings Institution. She says even though the United States may be relying less on OPEC oil—the group still remains powerful. 

That’s especially because of China—the world’s second-largest economy. It imports more OPEC oil than ever. And OPEC is also dumping more oil into developing nations. 

GROSS: OPEC is very powerful in the world of setting prices. The Saudis do something that no commercial producer would do and that is that they keep some oil production capacity in reserve that they can start up or shut down…to influence prices when it needs to. 

Ramanan Krishnamoorti says energy independence may become more important than ever as tensions rise between the U.S. and Iran in the Strait of Hormuz. Twenty percent of the world’s oil supply passes through the narrow channel.

Krishnamoorti says Iran’s recent attack on two oil tankers in the strait is meant to send a message. 

KRISHNAMOORTI: It’s clearly a way to demonstrate that they do control that strait. So if you stifle 20 percent of the production of the supply of oil to the world, you have the ability to hold the world hostage.

Reporting for WORLD Radio, I’m Sarah Schweinsberg.

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