As you may have heard, international trade has become something of a heated issue. President Trump left last weekend’s G7 meeting in Canada angry over the protectionist policies of some of America’s closest allies, which he emphasized by refusing to endorse the group’s written statement on shared economic, trade and environmental aspirations. Leaders of the other G7 members – the world’s seven most advanced economies – were none too pleased themselves, blaming Trump for what they viewed as undue hostility and breaches of diplomatic protocol.
It’s a fight I’ll leave to others. Reasonable people can disagree over how fairly or unfairly U.S. exports are treated by other countries. But I will note that, when it comes to foreign sales of U.S. energy products, the future looks very rosy.
Exports of American oil, gas and refined fuels are already booming. Remember back in 2006, when President George W. Bush lamented that American was “addicted to oil,” much of it sourced from abroad? At the time he issued that warning, net U.S. oil imports—the difference between what the country imported and what it sold abroad—totaled 10 million barrels per day. Flash forward to today, and net imports have been nearly halved, to a range of 5 to 6 million barrels per day, depending on the time of year.
Soaring domestic production is the main reason that the U.S. has been “breaking” its addiction to foreign oil. But America isn’t just producing more crude; it’s exporting more, too. Crude exports have jumped from practically nothing at the time of Bush’s speech to about 2 million barrels per day. Congress lifted the decades-old ban on most crude exports in 2015, largely because domestic producers were pumping more light, sweet crude oil than U.S. refineries could process. Many overseas buyers are eager for that type of oil. And U.S. crude tends to sell at a discount to Brent, the global oil benchmark, making it even more attractive to foreign refiners.
Exports of refined fuels are going even stronger than sales of crude itself. In fact, America is a net exporter of gasoline, diesel and other fuels. Net exports of refined petroleum products hit a whopping 3.5 million barrels per day last week, according to the Department of Energy. Back when Bush warned about being addicted to foreign oil in 2006, the U.S. was a net importer of refined products, to the tune of more than 2.5 million barrels per day.
Where do all those barrels go? Mexico is the biggest buyer, followed by Canada and then China. G7 members Japan, Italy, Great Britain and France are sizable customers, too. (See a breakdown of U.S. fuel exports by destination here.)
What does this all mean for the U.S. trade deficit? At the time of Bush’s 2006 State of the Union address, oil and refined fuels accounted for 35% of the total trade deficit. By April of this year, that figure had fallen to just 10.5%, according to the Census Bureau.
Natural gas makes the trade deficit look even better. Long a net gas importer, America became a net exporter last year. And those exports are bound to keep growing as domestic gas production rises and more of that bounty flows by pipelines to Mexico and Canada, and on ships in liquefied form to customers all over the world.