Molecular Tourism
On the travel habits of the world's most important commodity.
“The art of simplicity is a puzzle of complexity.” – Douglas Horton
If one doesn’t have reason to be entrenched in the nuances of the US energy markets, recent trends in the international trade of crude oil might seem perplexing. Despite reclaiming the mantle of the world’s largest producer of oil, the US still imports nearly 6.5 million barrels per day (bpd) of the stuff. At the same time, the country has grown to become a significant exporter of oil, crossing upwards of 5 million bpd in both 2022 and 2023. All this shuttling of barrels between borders seems rather inefficient, no? Why not just net things out domestically and import only what is needed? If only it were so easy.
Judging by the response from those in the political class to various economic crises, they’ve ignored their fiduciary obligation to grok the fundamentals of this all-important product class. Shamelessly, superficial suggestions are trotted out from this group each time energy prices get a little frothy. Take Democratic Senator Ed Markey, who became the latest to propose banning all US exports of fossil fuels earlier this year (emphasis added throughout):
“Sen. Ed Markey (D-Mass.) introduced legislation Thursday that will reimpose a ban on U.S. fossil fuel exports, citing environmental hazards and possible impacts on domestic prices.
The measure would ‘help prioritize American consumers, protect our climate and promote environmental justice and put the United States on a path to self-sufficiency through domestic clean energy production,’ Markey said Thursday at a press conference on Capitol Hill, flanked by supporters of the bill from communities in the Rio Grande Valley and the Gulf Coast.”
The Democrats hold no monopoly on energy ignorance nor political opportunism, as Republicans were quick to prove back in January:
“The U.S. House of Representatives overwhelmingly passed a bill on Thursday to ban releases of oil from the U.S. Strategic Petroleum Reserve from being exported to China, though the measure faces an uncertain future in the Senate. The bill passed 331-97 in the House, which Republicans took narrow control of this month. All of the ‘no’ votes came from Democrats.
The issue of U.S. oil exports to China became a rallying call for Republicans last year when President Joe Biden, a Democrat, announced the sale of 180 million barrels from the SPR to tame oil prices that rose due to Russia's war on Ukraine.”
Lack of basic knowledge of how current energy markets are structured even catalyzes rare moments of bipartisanship, like when both sides of the aisle recently coalesced to express their opposition to the Biden administration’s efforts to restart oil imports from Venezuela:
“The Biden administration’s interest in regaining access to Venezuelan oil is facing stiff opposition at home over concerns it would prop up an autocratic regime that is a close ally of Russia.
The pushback comes from both Republicans and many prominent Democrats, as well as Venezuela’s U.S.-backed opposition, that recently warned officials in Washington it is a mistake to consider turning Caracas back into an energy ally without restoring democracy there first.”
What do increasing US oil exports, oil from the Strategic Petroleum Reserve ending up in China, and efforts to reopen the oil trade with Venezuela have in common? They all make perfect sense given the current positioning of US energy assets relative to global competition. Unraveling the riddle requires an understanding that not all crude grades are created equal, each individual refinery is tantamount to a bespoke chemical plant, and the journey from crude oil to finished products like gasoline and diesel is not nearly as straightforward as many politicians believe. Let’s properly contextualize reality, recast these headlines accordingly, and build a framework for understanding which policy proposals make sense.