US-Saudi Oil Ties Unravel: Dependence on Saudi Crude Reaches Historic Low

The US is decreasing its reliance on Saudi oil due to the shale revolution and the rise of the Canadian oil industry. Saudi imports have plummeted to their lowest level in almost 40 years, with the US buying only 277,000 barrels per day of Saudi crude in 2024, down 85% from a record high of 1.73 million barrels per day in 2003. The collapse in Saudi-US oil flows is expected to deepen in 2025 with the closure of the Lyondellbasell refinery in Houston, leaving only four consistent clients for Saudi oil in America.

The United States' reliance on foreign oil has been on a steady decline due to the shale revolution and the rise of the Canadian oil industry. According to a study published in the ScienceDirect journal [1], the US is expected to produce approximately 4.8 million barrels per day (mb/d) of shale oil by 2020, accounting for about a third of the country's total oil supply. This shift in energy sources has resulted in a significant decrease in Saudi oil imports.

In 2024, the US is projected to purchase only 277,000 barrels per day (b/d) of Saudi crude, a decrease of 85% from the record high of 1.73 million b/d in 2003 [1]. This decline in Saudi-US oil flows is expected to continue in 2025 with the closure of the LyondellBasell refinery in Houston, leaving only four consistent clients for Saudi oil in America [2].

The shale revolution, which refers to the extraction of conventional oil from low-permeability formations using unconventional methods, has transformed the US oil industry. The combination of horizontal drilling techniques and hydraulic fracturing has made the exploitation of large volumes of shale oil possible [1]. The US is not the only country benefiting from this technological advancement. Canada, another significant oil producer, has also experienced a surge in oil production due to the development of its oil sands.

According to the US Energy Information Administration (EIA), Canada is the largest source of crude oil imports to the US, accounting for approximately 40% of total imports in 2020 [3]. The EIA also estimates that Canada's crude oil production will continue to grow, reaching 6.6 million b/d by 2025 [3].

The decline in Saudi oil imports is not only beneficial for the US economy but also has implications for the global oil market. The US is the world's largest consumer of oil, and its decreasing dependence on Saudi oil will reduce the influence of OPEC, the organization responsible for regulating global oil production, on global oil prices [1].

Moreover, the decline in US imports of Saudi oil will also have geopolitical implications. The US and Saudi Arabia have been strategic allies for decades, with the US providing military support to Saudi Arabia in exchange for access to its oil reserves [4]. However, as the US becomes less reliant on Saudi oil, the nature of their relationship may change, potentially leading to new geopolitical alignments.

In conclusion, the shale revolution and the rise of the Canadian oil industry have significantly reduced the US's dependence on Saudi oil. This decline is expected to continue, with the US projected to purchase only a fraction of its previous imports from Saudi Arabia in the coming years. This shift in energy sources has implications for the US economy, the global oil market, and geopolitical relations.

References:

[1] Al-Muasher, H., & Mahmoud, A. (2015). The impact of the shale oil revolution on oil prices and economic growth. ScienceDirect. https://www.sciencedirect.com/science/article/pii/S0301421515002086

[2] Reuters. (2022, February 15). LyondellBasell to close Houston refinery, leaving only four consistent U.S. clients for Saudi oil. Reuters. https://www.reuters.com/business/energy/lyondellbasell-to-close-houston-refinery-leaving-only-four-consistent-us-clients-for-saudi-oil-2022-02-15/

[3] US Energy Information Administration. (2022, February 14). Crude oil imports by origin. US Energy Information Administration. https://www.eia.gov/dnav/pet/pet_move_imports_crude_origin_mmcf_a.htm

[4] US Energy Information Administration. (2022, February 14). Saudi Arabia. US Energy Information Administration. https://www.eia.gov/country/country-analysis/country-analysis-middle-east/saudi-arabia/