'To talk of peace is not hard. To live it is very hard.' -Cochise

The U.S. Isn't Dependent on Foreign Oil

by Ethan Glover, Thu, Dec 18, 2014 - (Edited) Fri, Dec 19, 2014

Recently the discussion about the United States’ dependence on foreign oil has reemerged. The clamor about how the country needs to start producing locally to avoid high prices is back.

These kinds of debates and slogan-based ‘movements’ annoy me. Still, out of curiosity I did a little research on the subject.

Where Does U.S. Oil Come From?

First, there’s the myth that the United States imports most of its oil. In reality, in 2012 the United States imported 40% of its oil. That number has continued to go down in recent years.

Half of this imported oil came from the western hemisphere, most of it from Canada. This brings up an important point, the actual locations of where imported oil comes from.

One of the biggest and fastest growing oil fields in the United States, the Bakken Formation, just so happens to overlap with Canada.[1. Bakken formation. Retrieved December 19, 2014.]

The biggest Persian Gulf importer, Saudi Arabia, accounts for only 13% of U.S. imports. Half of that 13% comes from prepositioned rigs in the Gulf of Mexico.[2. Glover, E. (2014, November 30). Bretton Woods – Violence Implied. Retrieved December 19, 2014.]

This is all to say that most of the United States’ imports come from local areas. The term ‘imports’ better describes who owns the land, not the distance the oil travels.

Why Are Gas Prices So High?

So why then are gas prices so high? Gas has dropped in the United States recently but an average is around $3-$4/gal.

In Saudi Arabia, gas costs $0.45/gallon. In Kuwait, it costs $0.80/gal.

However, on the other side of things, if you look at import dependent countries, you see prices that go the other way. In Japan and India gas is normally around $5/gal.[3. Cost of Living. Retrieved December 19, 2014.] In Europe it ranges from $6-$10/gal.[4. Mahapatra, L. (2013, June 25). Gas Prices At The Pump: Europeans Pay Almost Twice As Much As US Residents. Retrieved December 19, 2014.]

I agree that prices could decrease, gas tax accounts for nearly $1/gal on average.[5. Fuel taxes in the United States. Retrieved December 19, 2014.] If the U.S. didn’t arbitrarily import oil from a third party in the Gulf of Mexico for the sake of a Cold War era agreement, we might see a major drop in prices.

More importantly though, prices and dependence aren’t nearly as bad as the media says. Wherever the government interferes in the market, you’ll see excessive prices. This isn’t unique to oil, it’s the norm.

What Does This Have to Do With Russia?

With all that said, the U.S. is decreasing its oil imports. Some people have blamed this on Russia’s current economic problems. Media outlets say that the Russian ruble has halved in value due to the shale boom in the U.S.

In reality, we can look to the U.S. sanctions to find the source of Russia’s economic problems. From the U.S. Department of State:

“We have also suspended credit finance that encourages exports to Russia and financing for economic development projects in Russia, and are now prohibiting the provision, exportation, or reexportation of goods, services (not including financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation, or in maritime area claimed by the Russian Federation and extending from its territory, and that involve five major Russian energy companies.”[6. Ukraine and Russia Sanctions. Retrieved December 19, 2014.]

The idea that Russia’s failing economy comes from a U.S. shale boom sounds like a major conflation.

If the U.S. removed the sanctions, and the shale boom continued, Russia wouldn’t have an issue. The United States doesn’t export oil, nor do they import from Russia. (On a significant scale.)

Thanks to Bretton Woods, these two countries operate on two separate markets. Who trade with whom comes down to whose allies with whom.

The United States doesn’t want to take all the blame for wrecking Russia’s economy, so they point to something else. Sadly, the finger pointing seems to work quite well.