The US consumes about 18.7 million barrels of oil per day (bbl/day). US domestic oil production averages about 9 million bbl/day, resulting in a deficit of about 9.7 million bbl/day. Because of a number of factors, including the need to match oil grades with refinery capacity and end uses, however, the US imports about 11.7 million bbl/day.
In other words, the US imports more than 50% of the oil it consumes.
Now we could start breaking down our imports into reliable and less reliable suppliers Canda and Mexio, for example, supply about 30% of US oil imports. That sounds relatively safe. But that would miss the point. Once you start importing oil, you are in a global oil market where changes in supply and/or demand in even one country can have an impact on the price Americans must pay for oil imports.
The country that is causing the most concern about oil prices right now is Libya. Ranked 18th in world oil production, Libya produces about 1.79 million bbl/day and exports about 1.5 million bbl/day.
The other countries in the midst of Jasmine Revolutions are even smaller producers. Oman is ranked 25th with production of 816,000 bbl/day. Egypt is ranked 29th with 680,000 bbl/day. Yemen is ranked 37th with 288,000 bbl/day. Tunisia is ranked 54th with 91,000 bbl/day. Bahrain is ranked 63rd with 49,000 bbl/day.
The US imports only about 79,000 bbl/day from Libya, less than a rounding error when you consider how much oil the US imports every day, so you might be tempted to think problems in Libya won't have much of an impact on US prices. But you would be wrong. If Libyan oil exports to Europe were disrupted, the Europeans would have to find oil someplace else. That would drive up the price of the 11.7 million bbl/day that the US must import from world markets.
We also have to consider the particular grade of oil. Libyan oil is known as sweet crude because of its low sulfur content. This is, in layman's terms, a premium product because you get much more gasoline, diesel, and kerosene from sweet crude than from sour crude. A loss of sweet crude simply cannot be made up with an equal amount of sour crude.
There is some good news. Libya requires revenues from oil exports to function. Oil exports account for about 45% of Libya's Gross Domestic Product (GDP). In the long run, regardless of who runs that country, they will have a very big incentive to keep the oil flowing. In the short run, OPEC probably has enough spare capacity to get us through any short-term disruptions. At least as long as the global economy continues to recover from a recession. But if demand picks up shar
How much will OPEC allow the price to rise? Tough to say with any precision. We know what happens if oil goes into the $140 per barrel range. The last time that happened, it triggered the Great Recession. We also know that the economy seems to tolerate prices at $90 to $100 per barrel without going into a tailspin. The consensus view among analysts seems to be that prices at or above $100 per barrel may be the new normal. With the very real possibility of prices at the $120 per barrel level if OPEC sees a need to tamp down demand or if markets get jittery in response to events in Libya or elsewhere.
So how much oil is at risk? The answer is: More than enough that we should be concerned.
Woodbridge, New Jersey