The United States is the world’s biggest producer of crude oil, so why do we need imports?

Bet you’re hearing points like that in conversations about Canadian crude oil and the potential impact of tariffs. That’s why we wanted to start this week’s newsletter with a few quick facts that you can use to inform those conversations:

Why does the U.S. import crude oil?

• The amount of crude oil U.S. refineries process greatly exceeds U.S. crude oil production. The United States is producing a record amount of crude oil (~13.4 million barrels per day), while U.S. refineries need about 16.5 million barrels per day to maintain current production levels.
   
• Today, most domestic crude oil is “light,” but many refineries need a heavier mix. In fact, more than 70% of U.S. refining capacity runs most efficiently with heavier crude. That’s why 90% of the crude oil we import is heavier than U.S.-produced shale crude.
   
• Re-tooling refineries to exclusively process light U.S. crude oil would cost billions. We also lack the infrastructure to cost effectively supply U.S. crude oil and refined products to every region. Even if the economics of re-tooling facilities worked, it could take close to a decade to permit and build new pipelines.

We’re working on a few resources that go a little deeper into crude oil imports and the potential impact of tariffs. So keep an eye out for more next week.

Happy Friday!

-Charlie and the AFPM EMPOWER team

P.S. - Kudos to all of you who sent messages to the President’s transition team! If you missed it, one of the executive orders President Trump signed on day 1 started the process of undoing federal and state vehicle mandates.

In the news

Trump’s Dream of Energy Dominance Relies on Canada - Bloomberg

In theory, President Donald Trump’s threat of sweeping tariffs against Canada, a major oil producer, fits with his desire for US “energy dominance.” In practice, the drive for dominance has relied heavily on Canadian oil.

Chemicals industry, freight rails brace for Trump tariffs on Canada, Mexico - CNBC

U.S. trade with Canada and Mexico is back in the crosshairs of the second Trump administration, with the threat made by President Trump to place 25% tariffs on goods from both North American border nations to start on February 1. Much of the focus has centered on autos and other consumer items, but Canada is also the top trading partner of the U.S. for critical chemicals, an industry now bracing for the potential impact.

How Trump’s executive orders could tilt US energy markets - E&E News

A flurry of Trump’s Day 1 executive orders intended to ease environmental permitting bottlenecks and boost U.S. fossil fuel production have the potential to redirect vast flows of money away from clean energy and toward traditional investments in oil and gas, analysts said.

How President Trump’s energy emergency declaration could impact production in Texas - Texas Standard

Houston Chronicle reporter James Osborne says U.S. energy production is currently quite high, making it uncertain how lifting of restrictions will impact what comes out of the ground.

EIA forecasts that crude oil prices will drop over the next two years - Daily Energy Insider

EIA predicts that benchmark Brent crude oil prices will fall from an average of $81 per barrel (b) in 2024 to $74/b in 2025 and $66/b in 2026. This is due to strong global growth in production of petroleum and other liquids and slower demand growth.