Six common myths about global and US energy issues

At times politicians, bloggers, and even financial professionals make comments about US domestic and global energy issues that are factually inaccurate.  When you are having a cocktail at the New Year's Eve party in a week, ask around what people think about energy dependence, production, global supplies, etc. and you may hear some of the following six myths:

Note: wherever units are not provided, the assumption is million barrels per day

Myth #1: US crude oil comes from the Middle East/Persian Gulf.

Not true. A large portion of imports is coming from Canada and other non-OPEC nations.  Only about 18% is coming from the Persian Gulf

Imports from OPEC nations - million barrels per day (source: EIA)

Imports from non-OPEC nations (source: EIA)

Here is the OPEC vs non-OPEC trend for the last 3 years:

Source: EIA

Myth #2: The US domestic energy production continues to dwindle.

Not true. The US domestic energy production is in fact increasing.

US domestic production  (source: EIA)

Eurasia Review: Oil extracted from shale deposits in North Dakota, Montana, and Texas has reversed years of decreasing American oil production, leading to increased domestic extraction and thus reducing dependence on overseas oil from 60 percent of U.S. consumption in 2005 to a little less than half now.

Myth #3: If the US produced more of its energy requirements, the price at the pump would be lower.

This is a common misconception and is not true in the global economy.

Eurasia Review: ... it would not matter much if the United States produced 100 percent of what it consumed or whether it all came from the Persian Gulf, because the price at the pump is determined by the worldwide oil market. If more oil is put on market from anywhere around the globe, the price will go down; similarly, if oil production is cut anywhere in the world and not offset by increases elsewhere, the price will go up.

Myth #4: US energy needs are constantly growing.

Not true.

WSJ:   U.S. customers have been pulling back in part because an anemic economic recovery has left millions still looking for work. In August, U.S. drivers burned 7.7% less gasoline than four years earlier, when gasoline usage peaked.

Here is a chart showing the US energy consumption for the past three years (see the attached EIA document for more detail).

US energy consumption (source: EIA)

Myth #5: The US is not an energy exporter because it has no excess energy to export.

This is true on a net basis (imports less exports), but just the energy exports have been on the rise.

Source: EIA

In particular the US exports a great deal of coal and refined products because of efficient refining capabilities:

Source: WSJ

With higher exports, the net imports (imports minus exports) have been declining:

US net imports (source: EIA)

Myth #6 - this one will get the conversation really going: World's oil production has already peaked and as the reserves dwindle, more wars will be fought over the scarce energy resources.

Not true.

Eurasia Review  First of all, “experts” have been repeatedly predicting the depletion of the world’s oil reserves since the late 1800s, but it never seems to happen. New technologies and periodic higher prices make previously uneconomic deposits viable—such as the tar sands and shale oil that have recently become economic—thus sustaining world production. Second, academic research has indicated that conflicts are much more likely over allocation of money received from abundant natural resources (for example, fighting in Nigeria over who gets proceeds from oil exports) than conflict over scarce resources that can be priced in a market. That is, it is cheaper to pay the market price than to go to war.