The U.S. is becoming less reliant on OPEC due to the increased production of shale oil and higher oil imports from Canada and Mexico
Intriguing developments are reshaping the landscape of global oil and energy dynamics, with far-reaching geopolitical ramifications. These emerging trends are poised to become even more evident in the coming months, solidifying their impact on the world stage.
For many decades, the United States, the world’s sole superpower, found itself tethered to the Middle East for its oil and energy requirements. This dependence occasionally provided political leverage to the Arab oil-rich nations. Consequently, achieving energy independence has been a longstanding objective for the United States.
The once-elusive dream of energy independence now appears well within reach. With the rise of shale oil on the global oil market and the subsequent increase in U.S. crude production, this decades-long dependence has steadily waned. The U.S. is progressively reducing its reliance on Middle Eastern oil.
|What to expect for oil prices in 2024
|It’s time to unleash Canada’s energy advantage
|OPEC+’s ability to influence oil markets dwindling
In a groundbreaking development in 2023, the U.S., according to Forbes, imported approximately 80 percent of its oil from countries within the Western Hemisphere. This shift holds substantial significance in the context of global geopolitics.
Canada and Mexico alone supply about two-thirds of the total U.S. oil imports. Canada is, by far, the largest source of U.S. oil imports, at 55.67 percent through October. Mexico is second, at 12.09 percent – meaning these two countries account for over two-thirds of all U.S. oil imports by value. Colombia, Brazil, Ecuador, Venezuela, and Guyana are also in the top 10, pushing the total from the Western Hemisphere above 80 percent.
Conversely, in 2023, U.S. oil imports from Saudi Arabia and Iraq are projected to make up a mere 10 percent of the total U.S. demand. According to the most recent data from the U.S. Census Bureau, accurate through October, this marks the second-lowest percentage on record.
To provide context, Forbes points out that for six of the seven years between 2012 and 2018, the Saudis and Iraqis accounted for more than 20 percent of U.S. oil imports, or roughly twice the current percentage.
The OPEC strategy of reducing its oil production to stabilize markets and establish a price floor has proven to be a double-edged sword. As mentioned in Charles Kennedy’s analysis on Oilprice.com, while it provided some stability to the crude markets, it also led to a decline in OPEC’s market share. And according to Reuters, OPEC could potentially face further loss of market share in early 2024 following the recent departure of Angola from OPEC, a decrease in global crude demand, and the escalating production levels of non-OPEC nations.
Reuters also reported that OPEC’s production, without Angola, is set to slip below 27 million barrels per day (bpd), representing less than 27 percent of the total global supply of 102 million bpd.
Although OPEC has managed to maintain a market share ranging from 30 to 40 percent, as reported by Reuters, the unprecedented surge in shale oil production by the U.S. has significantly eroded its share. OPEC’s strategy of cutting output to safeguard its market presence may not be viable in the long term. At some point in the near future, OPEC may be forced to change its direction.
And with the news that the U.S. Department of the Interior has signed off on three new oil and gas lease auctions in the Gulf of Mexico, there are now indications that the Saudi and the OPEC grip on the oil markets would loosen further, Oilprice.com’s Simon Watkins underlined in a recent write-up.
These auctions, writes Watkins, complement the many other conventional and shale exploration and development projects recently unveiled by prominent U.S. oil and gas companies in the past year, including the greenlight for U.S. oil giant ConocoPhillips’s U.S.$8 billion Willow oil and gas drilling project in Alaska.
OPEC is now facing a new reality. It is no longer the sole arbiter of the supply side of the global energy dynamics.
Times have changed.
Toronto-based Rashid Husain Syed is a highly-regarded analyst specializing in energy and politics, with a particular emphasis on the Middle East. Besides his contributions to both local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. His insights on global energy matters have been sought after by organizations such as the Department of Energy in Washington and the International Energy Agency in Paris.
For interview requests, click here.
© Troy Media
Troy Media is an editorial content provider to media outlets and its own hosted community news outlets across Canada.