|By Arabian Post Staff| Donald Trump may not go the full course on his threat to stop imports of crude oil from Saudi Arabia, which he had threatened during the election campaign, analysts say.
“We protect countries, and take tremendous monetary hits protecting countries,” Trump said in an interview cited by Reuters. “We lose, monetarily, everywhere. And yet, without us, Saudi Arabia wouldn’t exist for very long.” Trump said the United States “desperately needed” oil from the Gulf a few years ago but now was on the verge of achieving energy independence thanks to the shale revolution.
The United States had found oil in places “we never thought had oil” with the result there is a glut with “ships out at sea that are loaded up and they don’t even know where to dump it”.
Reuters: The United States has always had a complicated relationship with Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries. The complexity stems from the fact that United States is simultaneously one of the world’s largest oil producers as well as its largest consumer and a large net importer.
At times, U.S. policymakers have accused OPEC of being a cartel which has sought to keep prices artificially high to the detriment of U.S. motorists and other consumers. But at other times the United States has accused Saudi Arabia and other OPEC members of flooding the market, dumping oil, and predatory pricing designed to put U.S. oil producers out of business. Saudi Arabia and other OPEC members have always had a particularly fraught relationship with small and medium-sized “independent” oil producers of the United States.
Like most other aspects of Trump’s programme, the details of his energy policy have yet to be worked out. But a future Trump administration is very unlikely to try to restrict oil imports for practical as well as political reasons.
The markets for crude and refined fuels are fundamentally global so it makes no sense to talk about achieving energy independence. The United States has never relied on crude from the Middle East but its partners in Europe and Asia have been much bigger importers. And the law of one price ensures that oil price shocks in Europe and Asia affect consumers in the United States.
Furthermore, the United States remains far from self-sufficient in crude. Even at the height of shale drilling boom, the country still needed to import more than 7 million barrels a day of crude to feed its refineries.
Most refineries require a blend of light and heavy crudes to operate efficiently. While domestic shale oil is mostly very light, imported foreign crudes, especially from Saudi Arabia, are heavier, and needed for blending. If a Trump administration banned oil imports from Saudi Arabia, the shortfall of medium and heavy crudes would have to come from other producers: Iraq, Iran, Russia or Venezuela.
The major oil companies, including Exxon and Chevron, which have significant political influence, will resist any efforts to restrict the choice of crudes available for their refineries. The United States cannot easily discriminate against imports from Saudi Arabia because both countries are members of the World Trade Organization and bound to extend each other most-favoured-nation treatment.
Thanks to the shale revolution, the United States has emerged as a major exporter of refined products including gasoline and distillate, so it has a strong interest in upholding free trade in oil and fuels.