U.S. Oil Exports Reach 1950s Milestone
News this week that U.S. crude oil exports had surged in June to reach the highest since 1957 raised a question not often asked: Why did U.S. exports suddenly surge, then just as quickly drop, nearly six decades ago?
In March 1957, the United States exported a record 455,000 bpd of crude, up from just 40,000 bpd in the same month a year earlier, data from the U.S. Energy Information Administration showed. A year later, exports were back to just 27,000 bpd.
Unlike the current export boom, fueled by new shale oil drilling technology that has unleashed an unprecedented revival in U.S. production, the abrupt rise and fall in the 1950s was the result of political turmoil in the Middle East.
In July 1956, Egyptian President Gamal Abdel Nasser nationalized the Suez Canal, the waterway constructed some 90 years earlier connecting the Mediterranean Sea to the Red Sea. The 101-mile (163 km) seaway was a crucial link between big oil producers and European refiners, ferrying some 1.2 million bpd to Western Europe, particularly to Britain and France.
The move was seen as punishment for the United States and Britain withdrawing funding for the Aswan High Dam, but it also stung European nations who were losing sway over former colonies and led to a global struggle known as the Suez Crisis.
Israel, France and Britain moved troops into the region to assert their control, bringing commercial oil flows through the canal to a halt -- with dire consequences for Europe. Alternative routes were far too long to compensate.
"(The oil) could go around the Cape Horn, but that was difficult and there was limited shipping capacity," said Dr. Philip K. Verleger, Jr., president of consultancy PKVerleger LLC and a former advisor to President Carter.
At the time of the nationalization, Britain had around six weeks’ worth of supply of oil on hand, and France had only slightly more, according to Rose McDermott's book Risk Tasking in International Politics.
Amid pressure from Washington and growing economic strain, oil-starved nations in Europe removed their troops from territory and the United States started pushing crude oil across the Atlantic. By November 1956, oil exports jumped to 285,000 bpd from 47,000 bpd a month prior, according to the EIA data.
The Canal reopened in April 1957, allowing Europe to resume direct shipments and bringing a quick halt to U.S. exports.
The current rise in exports has been more measured and is likely to be much longer-lasting. Shipments from U.S. shores in June rose to 389,000 bpd, a 35 percent increase from May, with most of that oil going to Canada.
But while the exports have recently reached modern-day highs, they are still a much smaller fraction of U.S. supply.
In 1957, the U.S. consumed some 8.8 million bpd of crude, according to EIA data. Today, it consumes over twice that.
"The number is very small when you compare it to the total consumption and production in the U.S. in the 1950s," said James D. Hamilton, professor of economics at the University of California in San Diego.
"Back then, a couple thousand barrels a day would be a big deal. But now, we've got a story of the North Dakota and Texas boom and a production figure of some 8.5 million barrels a day."
BY CATHERINE NGAI (C) Reuters 2014.