This week we had the questionable pleasure of reading about Saudi Arabia’s Oil Minister
Khalid Falih’s words were rich in references to free trade and healthy international trade, but he might as well have spared his breath. The U.S., for the time being, is not in a position to suspend Saudi Arabian oil imports, and it’s all because of U.S. refineries.
Most U.S. refineries need a mix of light and heavy crude to function properly. Shale oil is light. The heavy crude that has to be added to it to produce fuels and lubricants
The peculiarity of refineries is that they can’t operate at half their capacity, as geoscientist and petroleum engineer Tad Patzek
In other words, refineries are constantly hungry for not just local light crude, but heavier blends as well, and these almost invariably come from abroad, be it Canada, Saudi Arabia, or Venezuela.
From this perspective, complete energy independence is impossible: if imports from Saudi Arabia are suspended, the U.S. Gulf Coast refineries will need to bring in heavy crude from another source. As Reuters commentator John Kemp
Eliminating imports is also a tough sell because of the political influence wielded by Big Oil. Exxon, Chevron, and their same-size rivals on the U.S. market are all international companies, which in the refining context, means they can feed their American refineries with heavy crude from West Siberia, if they’d like. These major international oil companies would not look kindly on any import ban.
Further, as Kemp reminds us, both the U.S. and Saudi Arabia are members of the World Trade Organization, both bound to uphold free trade. It was very likely that Falih was referring to this fact in his cautionary note to Donald Trump.
On top of this, the crude that America imports from Saudi Arabia turns into fuels and other oil products that are then exported globally. It is ill-advised to trample your friend’s exports when they enable yours, albeit partially.
The U.S., according to the EIA, consumes around
By Irina Slav for Oilpice.com
More Top Reads From Oilprice.com: