[Wright Concept]

US dependence on foreign oil growing - experts
By Robert Gibbons
1 hour, 35 minutes ago



U.S. dependence on foreign crude will keep growing despite efforts to spur domestic production, as demand in the world's largest energy consumer outpaces output, industry and government experts said Tuesday.

The rising need for oil shipments to the nation's ports could even hit a level soon that foreign crude producers might have a hard time matching -- translating into likely declines in the nation's stockpiles.

"The longer-term trend points to increasing imports and increasing reliance on imports," said Doug MacIntyre, analyst for the U.S. Energy Information Administration, the statistical wing of the Department of Energy.

"Most people expect that over the next couple of weeks we might see crude inventories begin to fall, because to maintain 10.5 million (barrels per day of imports) or more would be a high level," he said.

The United States is currently processing about 15.5 million bpd of crude oil into fuels, with little more than a third of that supply coming from domestic fields, according to government data.

Recent high crude futures prices, reaching a record $58.28 a barrel on April 4, have attracted a flood of imports and helped raise U.S. crude inventories to a six-year high at 334 million barrels as of May 13.

Refineries are expected to increase their crude oil consumption to around 16 million bpd in the coming weeks to feed summer gasoline demand and stockpile enough heating oil for the coming winter, requiring an unprecedented sustained flow of imports.

"We're only producing domestically about 5.5 million bpd of crude, which includes Alaska," said MacIntyre. "In order to keep inventories from falling when we reach 16 we will have to import 10.5 million bpd."

The prognosis for increased foreign dependence comes as U.S. lawmakers struggle to hammer out an energy bill. President Bush's administration hopes to open up to drilling parts of the Arctic National Wildlife Refuge and provide tax incentives to spur exploration.

"Drop in a bucket," said Rick Mueller, Oil Manager at Boston-based Energy Securities Analysis Inc.

"The volumes they're talking about, by the time they start to come on line in 2011 or 2012, probably will not match up with growth in U.S. demand alone, and that doesn't take into account continued decline of other U.S. fields."

In the most recent government data, U.S. crude oil imports jumped nearly 900,000 bpd to 10.86 million bpd in the week to May 13, the fourth highest weekly average on record.

Oil demand in the United States has grown about 2 percent since 2003, while domestic production has slumped about 30 percent to 50-year lows due to declines in mature oil fields. New production from the Gulf of Mexico has helped offset the decline in onshore domestic output this year.

"Imports? They represent the past of the U.S., the present and the future," said Tim Evans, senior energy analyst at IFR Energy Services.

"Two years ago we were importing about 9.5 million bpd. Last year we were hearing a lot of hand wringing from the Department of Energy about how we didn't know if sustained imports above 10 million bpd is possible.

"Now it's not only possible, it's routine and we're pushing 11 million bpd as the upper threshold," said Evans.

All agreed that the mathematics point to a need to include production and conservation in the mix of solutions.

"The mathematics would dictate looking at both sides of the equation, supply and demand," said MacIntyre.

"Absolutely, a greater emphasis on conservation, particularly auto fuel efficiency, is really the largest untapped source of barrels," said Evans. "We're unlikely to boost domestic output a million bpd..., but it would not be that hard to save a million bpd."

Evans noted that with the U.S. gasoline demand averaging around 9.5 million bpd, "if we were to knock that down by million, that would be a 10.5 percent improvement. And if you have a sports utility vehicle that currently gets 15 miles per gallon, you would need an increase only to 16.6 mpg in order to make that 10.5 percent."

"We could basically do that with our eyes closed," said Evans. "Just when you see the ad for the Hummer, turn the page. But that's not something U.S. refiners would like to see, and is not something automakers want to see because their product and profit mix are more based on the truck type vehicles."



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