10 ms·

Hearing "net exporter" made me wonder: is there some inefficiency, at a company or state level, in how we'll both export and import the same commodity? Why does

by alehul 8y ago

Hearing "net exporter" made me wonder: is there some inefficiency, at a company or state level, in how we'll both export and import the same commodity? Why does this occur? Is this the result of a lack of market makers who will hold the oil (maybe the cost of storage is too high), so it's shipped to wherever needs it at that exact point?

betterunix2 8y ago
I am not an expert, but one factor might be that not all crude oil is the same. Maybe refineries prefer to import a different kind of crude oil than what is extracted domestically (and likewise refineries in other countries are willing to buy the crude we are extracting here).
- lukasm 8y ago
  I think this is correct. Weight and sulfur level matter. It requires slightly different infrastructure. Also having import/export is strategic. If something happens to your local producer you've got a backup.
- 2trill2spill 8y ago
  Yea I know refineries in a lot of northern states like Minnesota are setup to process the high sulfur crude that comes from Canada. While most southern states have refineries that process low sulfur crude that comes from the United States.
mchannon 8y ago
Not sure you'd call it an "inefficiency", but absolutely this happens. Company A may own oil wells in Alaska and a refinery near Houston. Off the tankers go to Japan and Korea for the Alaskan crude, and in the tankers come from Venezuela to Houston.
- alehul 8y ago
  So with such trivial actions constituting an import or export, why do we use import/export as such an important measure, rather than where the imported thing was initially produced? Wouldn't that be where most of the value was added, and where most of the profit per unit of thing would flow to?
  - kamakazizuru 8y ago
    Not quite - especially in the commodities world - prices fluctuate and often ships can be at sea for months as the goods they carry are traded back and forth by companies based on energy contracts - in the end - something may have been produced in company X for 5€ and shipped when the price was 10€ - but by the time it arrives at its final destination its worth 50€ because the market has moved / the contract it was sold of was pegged at a higher rate
  - zerealshadowban 8y ago
    Indeed, "import" and "export" are merely nation-based lenses on regular trade. If you make the lens small enough, you or your family unit are "importing" all sorts of foods and products, and "exporting" a few mostly labor and services (you also have a terrific "trade imbalance" with your favorite baker and grocery store).
dorfsmay 8y ago
II don't know the details so my example might not make sense, but two factors are: Shipping: no easy to ship from producing site to say NE coast, so they might buy from Sweden and Saudi Arabia, while producer, say in Texas might have a pipeline to the west coast and export to China. Price/contracts: some large buyer (say refineries) buy on long term contracts and might still buy at prices negotiated when the US had policies restricting domestic production. Also, not everybody sells at market price, so you could buy foreign for cheaper than what's currently available domestically.
- zerealshadowban 8y ago
  I would strongly recommend not attempting to contract for or ship oil extracted in Sweden to the USA, or to anywhere else in the world. Unless you premise this on holding that Norway should never have gotten its independence 100+ years ago.
  - kbutler 8y ago
    What is your motivation for this? Are you asserting that buying oil from Sweden will somehow reverse Norway's independence? Or that we should punish Sweden for having had the union with Norway? Seems a long grudge to carry for a hundred-year-old "amicable and peaceful dissolution" https://en.wikipedia.org/wiki/Union_between_Sweden_and_Norway https://en.wikipedia.org/wiki/Union_between_Sweden_and_Norwa... Like recommending the US should not have helped England in WW 1 because of the war of 1812.
    - zerealshadowban 8y ago
      Sweden is not an oil producer.
      - seanmcdirmid 8y ago
        While Sweden has no oil production, they do export refined oil products.
parhamn 8y ago
Supply was added over the years and demand and subsequent contracts/relationships were added "on demand". More generally macro economic actors don't behave rationally collectively.
grigjd3 8y ago
We refine oil for a lot of countries.
taneq 8y ago
If a company is both an importer and an exporter (such that terms like 'net' make any sense) then yeah, the market is inefficient.
- gwright 8y ago
  This is too simplistic. The item might have variations (such as crude oil) which leads to different choices on import vs. export. The geographic source and destination might be important (well might be close to foreign refinery and vice versa). The method of shipment might matter (ship, rail car pipeline). The previous contracts and obligations might matter and so on
nicholas73 8y ago
In addition to crude type mentioned here, there are relative price differentials to take advantage of due to the local storage/transport constraints. For example, US oil may become cheaper because there is so much shale production growth there. Likewise, because Canada liberals continuously block pipelines, Canadian oil fell into the single digits last month. Of course, most of this differential is eaten up by transport middlemen, so this isn't much of a good thing for the consumer still.
21 8y ago
Not an expert, but if it were cheaper, some other company would appear which would buy from the US exporter and sell back to the US importer, avoiding oil going outside the country. The oil markets are some of the biggest and most efficient in the world, so there must be a reason for this.
anonu 8y ago
Crude might be moved elsewhere to be refined. We then import gasoline and other by products? Just a guess... I don't have the numbers.
Theodores 8y ago
After the 1973 crisis a law was brought in so that U.S. crude oil had to be sold on the domestic market, i.e. not available for export. Then it changed and here we are today. From https://www.forbes.com/sites/rrapier/2017/09/30/why-the-u-s-exports-oil/ https://www.forbes.com/sites/rrapier/2017/09/30/why-the-u-s-... Crude oil producers lobbied for an end to the export ban, and in late 2015 they got their wish when President Obama signed into law the Consolidated Appropriations Act, 2016. This $1.15 trillion spending bill contained a provision that stated: “To promote the efficient exploration, production, storage, supply, marketing, pricing, and regulation of energy resources, including fossil fuels, no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.” So this is what is happening. There is a lot of economic warfare going on in energy markets. The OPEC gig is designed to make sure that extracting oil is profitable, if there was no OPEC then it might as well be pre-Standard Oil days when there was a race to the bottom, with everyone churning out as much as they can and prices going to zero. Another change is that the U.S. vassal Iraq is back online, with the oil being looted from beneath the sands there to line the pockets of the big corporations that backed that particular war. Given this supply situation - the U.S. and Iraq now selling on the open market - something has to give. Hence, in this game of musical chairs it is practically necessary to keep other suppliers out of the game. Hence sanctions and other economic measures to keep players such as Venezuela, Iran and Russia in their place. Now this is bad for the U.S. dollar as sanctions, tariffs and protectionist nonsense mean that countries like India are happy to by oil from Iran. They see the childish USA as a here today, gone tomorrow empire and Iran as a proper civilisation with many millennia of legit history and culture. Same with China and the trade deals they have with Russia. This is all going on differently to before. In the pre-9/11 days the world was happy to buy a freshly printed dollar from Uncle Sam in order to buy oil. Now that bit is being bypassed, not out of choice but what do you do if there are sanctions stopping you from buying that useless greenback? For many decades the U.S. was able to print as much money as possible with those excess dollars going overseas, to not enter the domestic economy. This meant that there was no inflationary pressure on the dollar. With the Trump trade wars going on various countries are now reducing their dollar holdings and going for a mix of other currencies, e.g. the Euro and the Rouble. So soon the U.S. young people are going to be the bag holders and the whole scam of the U.S. dollar as the world's reserve currency is going to come crashing down. Hence the current desperation by the U.S. to foist their hydrocarbon products onto lame countries such as Poland and the Ukraine, usually wrapped up with some arms sales deal for good measure. Meanwhile more and more groundwater in the U.S. gets polluted with the miraculous fracking. This fracking business is built on quite sub-prime financing, tantamount to a Ponzi scheme and, once the LNG has been liquified and sent half way around the world it is not as competitive as 'gas from Russia'. World politics also goes from mutual trade and cooperation to protectionism and fascist politics. At least this is better than the 'Peak Oil' with massive die-off that doom-mongers were predicting 15 or so years ago but it does not make for happy times. Oil is not a 'scarce resource' even if it will run out eventually, the problem - as 'solved' by Standard Oil - is too many people drilling for it, so it has always been an artificial scarcity. Also that small detail of the law being changed to enable U.S. producers to export is not widely known, certainly not on this thread thus far has any comment been made.
zelon88 8y ago
America is very good at refining oil into other fuels. Many countries export crude oil to the United States that gets refined and sold back as fuel.
dredmorbius 8y ago
US reliance on fracking and natural gas results in high rates of extraction of light petroleum comonents: NGL (natural gas liquids) and lease condensate, especially. These cannot readily be converted into fuels, but are useful especially for processing heavier crude oil, particularly Agentinian / Orinoco cude, more comparable to tar. I believe Canadian tar sands also rely on these, for similar reasons. Lease condensate and NGL count toward total production and export numbers but are of limited use in domestic fuel consumption. https://www.eia.gov/dnav/ng/ng_prod_lc_s1_a.htm https://www.eia.gov/dnav/ng/ng_prod_lc_s1_a.htm https://www.eia.gov/dnav/ng/hist/rl2r57nus_1a.htm https://www.eia.gov/dnav/ng/hist/rl2r57nus_1a.htm The net import report suggests the difference is NGLs. https://www.eia.gov/petroleum/supply/weekly/ https://www.eia.gov/petroleum/supply/weekly/
peter303 8y ago
It is more efficient to export Alaska oil to Asia than to refine it in the lower 48. Alaska is only 4% of US production these days because North Slope is a more exornsive operating location than lower 48 shale oil.

by alehul 8y ago

betterunix2 8y ago

I am not an expert, but one factor might be that not all crude oil is the same. Maybe refineries prefer to import a different kind of crude oil than what is extracted domestically (and likewise refineries in other countries are willing to buy the crude we are extracting here).

lukasm 8y ago
I think this is correct. Weight and sulfur level matter. It requires slightly different infrastructure. Also having import/export is strategic. If something happens to your local producer you've got a backup.
2trill2spill 8y ago
Yea I know refineries in a lot of northern states like Minnesota are setup to process the high sulfur crude that comes from Canada. While most southern states have refineries that process low sulfur crude that comes from the United States.

mchannon 8y ago

Not sure you'd call it an "inefficiency", but absolutely this happens. Company A may own oil wells in Alaska and a refinery near Houston. Off the tankers go to Japan and Korea for the Alaskan crude, and in the tankers come from Venezuela to Houston.

alehul 8y ago
So with such trivial actions constituting an import or export, why do we use import/export as such an important measure, rather than where the imported thing was initially produced? Wouldn't that be where most of the value was added, and where most of the profit per unit of thing would flow to?
- kamakazizuru 8y ago
  Not quite - especially in the commodities world - prices fluctuate and often ships can be at sea for months as the goods they carry are traded back and forth by companies based on energy contracts - in the end - something may have been produced in company X for 5€ and shipped when the price was 10€ - but by the time it arrives at its final destination its worth 50€ because the market has moved / the contract it was sold of was pegged at a higher rate
- zerealshadowban 8y ago
  Indeed, "import" and "export" are merely nation-based lenses on regular trade. If you make the lens small enough, you or your family unit are "importing" all sorts of foods and products, and "exporting" a few mostly labor and services (you also have a terrific "trade imbalance" with your favorite baker and grocery store).

dorfsmay 8y ago

II don't know the details so my example might not make sense, but two factors are: Shipping: no easy to ship from producing site to say NE coast, so they might buy from Sweden and Saudi Arabia, while producer, say in Texas might have a pipeline to the west coast and export to China. Price/contracts: some large buyer (say refineries) buy on long term contracts and might still buy at prices negotiated when the US had policies restricting domestic production. Also, not everybody sells at market price, so you could buy foreign for cheaper than what's currently available domestically.

zerealshadowban 8y ago
I would strongly recommend not attempting to contract for or ship oil extracted in Sweden to the USA, or to anywhere else in the world. Unless you premise this on holding that Norway should never have gotten its independence 100+ years ago.
- kbutler 8y ago
  What is your motivation for this? Are you asserting that buying oil from Sweden will somehow reverse Norway's independence? Or that we should punish Sweden for having had the union with Norway? Seems a long grudge to carry for a hundred-year-old "amicable and peaceful dissolution" https://en.wikipedia.org/wiki/Union_between_Sweden_and_Norway https://en.wikipedia.org/wiki/Union_between_Sweden_and_Norwa... Like recommending the US should not have helped England in WW 1 because of the war of 1812.
  - zerealshadowban 8y ago
    Sweden is not an oil producer.
    - seanmcdirmid 8y ago
      While Sweden has no oil production, they do export refined oil products.

parhamn 8y ago

Supply was added over the years and demand and subsequent contracts/relationships were added "on demand". More generally macro economic actors don't behave rationally collectively.

grigjd3 8y ago

We refine oil for a lot of countries.

taneq 8y ago

If a company is both an importer and an exporter (such that terms like 'net' make any sense) then yeah, the market is inefficient.

gwright 8y ago
This is too simplistic. The item might have variations (such as crude oil) which leads to different choices on import vs. export. The geographic source and destination might be important (well might be close to foreign refinery and vice versa). The method of shipment might matter (ship, rail car pipeline). The previous contracts and obligations might matter and so on

nicholas73 8y ago

In addition to crude type mentioned here, there are relative price differentials to take advantage of due to the local storage/transport constraints. For example, US oil may become cheaper because there is so much shale production growth there. Likewise, because Canada liberals continuously block pipelines, Canadian oil fell into the single digits last month. Of course, most of this differential is eaten up by transport middlemen, so this isn't much of a good thing for the consumer still.

21 8y ago

Not an expert, but if it were cheaper, some other company would appear which would buy from the US exporter and sell back to the US importer, avoiding oil going outside the country. The oil markets are some of the biggest and most efficient in the world, so there must be a reason for this.

anonu 8y ago

Crude might be moved elsewhere to be refined. We then import gasoline and other by products? Just a guess... I don't have the numbers.

Theodores 8y ago

After the 1973 crisis a law was brought in so that U.S. crude oil had to be sold on the domestic market, i.e. not available for export. Then it changed and here we are today. From https://www.forbes.com/sites/rrapier/2017/09/30/why-the-u-s-exports-oil/ https://www.forbes.com/sites/rrapier/2017/09/30/why-the-u-s-... Crude oil producers lobbied for an end to the export ban, and in late 2015 they got their wish when President Obama signed into law the Consolidated Appropriations Act, 2016. This $1.15 trillion spending bill contained a provision that stated: “To promote the efficient exploration, production, storage, supply, marketing, pricing, and regulation of energy resources, including fossil fuels, no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.” So this is what is happening. There is a lot of economic warfare going on in energy markets. The OPEC gig is designed to make sure that extracting oil is profitable, if there was no OPEC then it might as well be pre-Standard Oil days when there was a race to the bottom, with everyone churning out as much as they can and prices going to zero. Another change is that the U.S. vassal Iraq is back online, with the oil being looted from beneath the sands there to line the pockets of the big corporations that backed that particular war. Given this supply situation - the U.S. and Iraq now selling on the open market - something has to give. Hence, in this game of musical chairs it is practically necessary to keep other suppliers out of the game. Hence sanctions and other economic measures to keep players such as Venezuela, Iran and Russia in their place. Now this is bad for the U.S. dollar as sanctions, tariffs and protectionist nonsense mean that countries like India are happy to by oil from Iran. They see the childish USA as a here today, gone tomorrow empire and Iran as a proper civilisation with many millennia of legit history and culture. Same with China and the trade deals they have with Russia. This is all going on differently to before. In the pre-9/11 days the world was happy to buy a freshly printed dollar from Uncle Sam in order to buy oil. Now that bit is being bypassed, not out of choice but what do you do if there are sanctions stopping you from buying that useless greenback? For many decades the U.S. was able to print as much money as possible with those excess dollars going overseas, to not enter the domestic economy. This meant that there was no inflationary pressure on the dollar. With the Trump trade wars going on various countries are now reducing their dollar holdings and going for a mix of other currencies, e.g. the Euro and the Rouble. So soon the U.S. young people are going to be the bag holders and the whole scam of the U.S. dollar as the world's reserve currency is going to come crashing down. Hence the current desperation by the U.S. to foist their hydrocarbon products onto lame countries such as Poland and the Ukraine, usually wrapped up with some arms sales deal for good measure. Meanwhile more and more groundwater in the U.S. gets polluted with the miraculous fracking. This fracking business is built on quite sub-prime financing, tantamount to a Ponzi scheme and, once the LNG has been liquified and sent half way around the world it is not as competitive as 'gas from Russia'. World politics also goes from mutual trade and cooperation to protectionism and fascist politics. At least this is better than the 'Peak Oil' with massive die-off that doom-mongers were predicting 15 or so years ago but it does not make for happy times. Oil is not a 'scarce resource' even if it will run out eventually, the problem - as 'solved' by Standard Oil - is too many people drilling for it, so it has always been an artificial scarcity. Also that small detail of the law being changed to enable U.S. producers to export is not widely known, certainly not on this thread thus far has any comment been made.

zelon88 8y ago

America is very good at refining oil into other fuels. Many countries export crude oil to the United States that gets refined and sold back as fuel.

dredmorbius 8y ago

US reliance on fracking and natural gas results in high rates of extraction of light petroleum comonents: NGL (natural gas liquids) and lease condensate, especially. These cannot readily be converted into fuels, but are useful especially for processing heavier crude oil, particularly Agentinian / Orinoco cude, more comparable to tar. I believe Canadian tar sands also rely on these, for similar reasons. Lease condensate and NGL count toward total production and export numbers but are of limited use in domestic fuel consumption. https://www.eia.gov/dnav/ng/ng_prod_lc_s1_a.htm https://www.eia.gov/dnav/ng/ng_prod_lc_s1_a.htm https://www.eia.gov/dnav/ng/hist/rl2r57nus_1a.htm https://www.eia.gov/dnav/ng/hist/rl2r57nus_1a.htm The net import report suggests the difference is NGLs. https://www.eia.gov/petroleum/supply/weekly/ https://www.eia.gov/petroleum/supply/weekly/

peter303 8y ago

It is more efficient to export Alaska oil to Asia than to refine it in the lower 48. Alaska is only 4% of US production these days because North Slope is a more exornsive operating location than lower 48 shale oil.