Energy and Related Products

The value of U.S. total exports of energy-related products increased modestly (by 5 percent) from 2013 to 2014 (see table EP.1). Refined petroleum products¹ accounted for the largest share—74 percent—of these exports in 2014.

The sectors showing the largest increases in total exports were natural gas and crude petroleum,² and those showing the largest decreases were coal and petroleum products (see table EP.2).

The value of U.S. general imports of energy-related products decreased significantly during 2013–14, primarily as a result of large declines in crude petroleum and petroleum products imports, while natural gas and coal saw small import gains.

Trade in this sector was impacted by rising U.S. production of crude petroleum, petroleum products, and natural gas. Production of crude petroleum reached levels not seen since the mid-1990s, while refineries operated at or above capacity to process these additional supplies. At the same time, increased output from shale sources bolstered production of natural gas. Coupled with largely stagnant U.S. consumption, the rising U.S. production helped to expand exports and reduce imports.

World prices for the benchmark crudes—West Texas Intermediate and Brent—declined from 2013 to 2014. West Texas Intermediate declined by 5 percent to an average of $93.26 in 2014, while Brent fell by 10 percent to an average of $99.02 in 2014. Both crudes registered steep declines beginning in late December 2014.

U.S. Exports³

In terms of value, the energy-related products for which U.S. domestic exports rose the most in 2014 were crude petroleum (for which exports more than doubled from 2013 to 2014) and natural gas components (for which exports increased by 38 percent). The largest decreases were coal and other carbonaceous materials (down by 25 percent).⁴ Although petroleum products account for roughly three-quarters of U.S. energy-related products exports, U.S. exports of these goods in 2014 remained largely unchanged from the 2013 level.

Canada, which has historically been the only consistent market for U.S. exports of crude petroleum as part of a commercial exchange agreement between U.S. and Canadian refiners, remained the primary market for U.S. exports of crude petroleum. These exports to Canada accounted for 99 percent of U.S. domestic exports, increasing by 130 percent to $11.5 billion in 2014. In terms of volume, U.S. domestic exports to Canada rose from 48 million barrels in 2013 to 118.2 million barrels in 2014. Large multinational energy companies operate in both countries and exchange crude and petroleum products across the border. An integrated system of shared pipelines crossing the U.S.-Canada border makes it easy and cost-efficient to transport crude petroleum from the wellhead to refineries. Because of the high levels of U.S. crude petroleum production and the fact that U.S. refineries were operating at or above capacity, unusually large volumes of U.S.-produced crude were exported to Canada for refining in 2014.

In terms of quantity, U.S. domestic exports of petroleum products increased by 7 percent to 1.4 billion barrels in 2014, with Mexico, Canada, and the EU being the primary markets. However, because of price and product-mix changes, the value of U.S. exports actually decreased by about 1 percent to $119.1 billion. Most of the increase in the quantity of these exports is attributed to the following factors: (1) reduced U.S. domestic demand for motor fuels, due in part to a lagging economy and more fuel-efficient motor vehicles; (2) increased U.S. production of petroleum products owing to rising supplies of domestic crude, the feedstock for petroleum products; and (3) high world demand for distillate and residual fuel oils.

As noted above, the decline in the value of U.S. exports was due to a combination of factors. First, the product mix being exported was changing: it included higher volumes of less expensive distillate fuel oils rather than finished diesel fuels. The second factor was falling prices on the world market. For example, the unit value of U.S. exports of petroleum products to the EU fell from about $100 per barrel in 2013 to $90–92 per barrel in 2014 because of lower-priced feedstock (crude petroleum).

The value of U.S. domestic exports of natural gas increased by 38 percent ($5 billion) to $18 billion in 2014. Exports declined in quantity, slipping from 1.6 trillion cubic feet in 2013 to 1.5 trillion cubic feet in 2014. However, the unit price of U.S. exports increased, rising by an average of 35 percent to $5.41 per thousand cubic feet for pipeline natural gas and by 30 percent to $15.66 per thousand cubic feet for liquefied natural gas (LNG).

Nearly all of the volume (99 percent) of U.S. natural gas exports is transported via pipeline to Canada and Mexico. An integrated system of pipelines allows easy transport among the countries along the borders. Exports to Canada decreased by 16 percent to 768 billion cubic feet in 2014 as natural gas production in Canada rose strongly, principally from shale sources. U.S. production from shale sources (which contain high levels of propane) also showed strong growth, and U.S. exports of propane to Mexico increased in 2014 by 8 percent to 712 billion cubic feet; propane is the primary fuel Mexicans use for heating, cooking, and other residential purposes.⁵

U.S. exports of LNG grew sharply, rising from about 7 billion cubic feet in 2013 to 13.6 billion cubic feet in 2014. Japan accounted for about 97 percent of total U.S. LNG exports (which are sourced from Alaska) as part of Japan’s continuing effort to replace its lost nuclear power (due to the 2011 Fukushima accident) with imported LNG and propane. Despite the strong increase, LNG exports to Japan have not reattained the high export levels of 30–35 billion cubic feet seen during 2009–11.

U.S. domestic exports of coal and other carbonaceous materials declined in value by about 25 percent to $10.3 billion in 2014 and by 18 percent in terms of quantity to 97.9 million short tons in 2014. U.S. coal exports have continued to decline from their record volumes in 2012. Most of these exports go to Europe and Asia. U.S. export declines reflect both lower European demand for steam coal (used to generate electricity) and increased steam coal supply on the world market from export-oriented Australia and Indonesia. In addition, China has continued to increase its exports of coal to the world in an ongoing effort to gain market share.⁶

U.S. Imports

U.S. general imports of energy-related products decreased in value by 9 percent to $350 billion in 2014, primarily as a result of reduced imports of crude petroleum and petroleum products, coupled with declining prices for these goods. Crude petroleum⁷ continued to be the primary energy product imported in 2014, accounting for 71 percent of the total value of sector imports; petroleum products accounted for 23 percent, and natural gas for 4 percent.

U.S. production of crude petroleum increased by 16 percent in 2014 to 3.2 billion barrels—its highest level since the mid-1990s—while U.S. consumption remained relatively stagnant at 5 billion barrels. As a result, there was declining U.S. demand for imports of crude, which fell by 5 percent to 2.8 billion barrels. At the same time, prices declined from an average of about $96 per barrel in 2013 to about $89 per barrel in 2014, resulting in the value of U.S. imports of crude falling by 10 percent to $247 billion in 2014.

Canada has been the leading U.S. source for imports of crude petroleum for decades and continued to be so in 2014, with import quantities rising by 6 percent to 941 million barrels. U.S.-Canada trade in crude fluctuates year to year, as large multinational petroleum companies operate in both countries and exchange crude and petroleum products. An integrated system of shared pipelines crossing the U.S.-Canada border makes it easy and cost-efficient to transport crude petroleum from the wellhead to refineries.

Imports of crude petroleum from all other major sources declined in 2014, primarily as a result of the increased U.S. production and stagnant domestic consumption. Crude petroleum imports from OPEC fell 15 percent to 1.1 billion barrels in 2014, with Saudi Arabia, Venezuela, Kuwait, and Nigeria all showing declines. The drops in imports are also attributable to supply disruptions in both Venezuela and Nigeria. Moreover, the growth in U.S. crude petroleum production from the Bakken and Eagle Ford deposits is of similar quality to Nigeria’s crude and has largely displaced it in the U.S. market. For example, two U.S. East Coast refineries that formerly processed Nigerian crude are now processing nearly 100 percent domestically produced crude petroleum.⁸

U.S. imports of petroleum products fell from $89.2 billion in 2013 to $78.8 billion in 2014. This decrease was due primarily to increased U.S. production coupled with reduced demand for residual fuel oils, used to generate electricity for large industrial complexes. Many of these industrial consumers have switched to natural gas, as it is a cleaner-burning and less expensive fuel. U.S. refineries, which generally satisfy over 90 percent of domestic consumption, increased their capacity utilization rates in 2014, further reducing demand for imports.

U.S. imports of petroleum products also declined in quantity by 12 percent to 688 million barrels in 2014. U.S. imports from Russia fell by 26 percent to 113 million barrels, as Russia continued closing refineries that only produced distillate and residual fuel oils, along with low-octane gasoline for export. Russia is replacing these refineries with ones that will produce and export higher volumes of middle distillates such as kerosene and diesel, which are higher-value products. U.S. imports from the EU also fell by 4 percent to 171 million barrels in 2014. One major reason for the decline was that certain EU countries continued to consolidate refining operations. Another was that Total’s three French refineries continued to run at reduced capacity because of worker unrest and maintenance issues.⁹

Although U.S. imports of natural gas declined in quantity by 7 percent to 2.7 trillion cubic feet in 2014, their value increased by 18 percent to $15.4 billion in 2014 because of substantially higher prices for both pipeline natural gas and LNG. The average import price rose from $3.83 per thousand cubic feet in 2013 to $5.49 per thousand cubic feet in 2014.

Imports from Canada, accounting for 98 percent of total U.S. natural gas imports in 2014, declined by about 5 percent to 2.6 trillion cubic feet. This quantity decrease is due to two main factors: a 6 percent increase in U.S. natural gas production, and normal trade fluctuations that occur regularly between the United States and Canada. The fluctuations are based on changes in market supply and demand along the pipelines.

The quantity of U.S. imports of LNG also declined in 2014, falling by 40 percent to 59 million cubic feet, largely because of reduced imports of LNG from Trinidad. The price of LNG from Trinidad was over 60 percent higher (at $9.71 per thousand cubic feet) than that for U.S.-produced natural gas and imports via pipeline from Canada. LNG prices were driven up by higher demand from Japan and other large consuming nations, coupled with the virtual shutdown of natural gas-rich Crimean production because of the conflict in Ukraine.¹⁰