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Oil You May Never See

Large Portion of Gulf Coast Oil Is Exported

SOURCE: AP/Alex Brandon

A drillship sits off the Louisiana coast in 2006. A large portion of the oil produced in the Gulf Coast is shipped overseas, and this undoubtedly includes some of the offshore oil produced there.

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This article contains a correction.

Even after the BP oil disaster in the Gulf of Mexico, many politicians continue to insist that the United States must expand offshore oil drilling despite the huge health, economic, and environmental damages in the event of a blowout. They assert that this oil is essential for U.S. economic health and national security. For instance, two weeks after the BP disaster began, House Minority Leader John Boehner (R-OH) reiterated that the United States needs “more environmentally responsible development of America’s energy resources.” These are code words for more offshore oil drilling.

gulf coast oil production and exports, 2003-09

More offshore drilling in the Gulf Coast region, however, may not do much to increase our energy security. A CAP analysis (.xls) of Energy Information Administration data found that a large portion of the oil produced in the Gulf Coast region is actually exported as finished petroleum products to other nations, and this undoubtedly includes some of the offshore oil produced there (see chart at right).

These finished petroleum products consist of both consumer and industrial fuels. Diesel fuel was one-third of these exports in 2008 in the Gulf Coast, and gasoline was another 10 percent. About half of the finished petroleum products are used for electricity generation and other industrial uses.

The entire nation is divided into Petroleum Administration for Defense Districts, or PADDs, which are “a geographic aggregation of the 50 States and the District of Columbia into five Districts.” PADD III is the Gulf Coast region of Alabama, Arkansas, Louisiana, Mississippi, New Mexico, and Texas.

The Gulf Coast region produces an annual average of 2.7 million barrels of oil per day (2008) to 3.2 million barrels day (2003). Slightly less than half of this oil—43 percent (2008) to 49 percent (2003)—is produced offshore.

During this time, the proportion of finished petroleum product exports to other nations from this region has nearly doubled, from 19 percent in 2003 to 40 percent in 2008. Major importers of U.S. finished oil products include Mexico, Canada, and the Netherlands.

The Energy Information Administration databases do not appear to have information on the exact proportion of oil finished petroleum products made from oil from the Gulf of Mexico that is sold to other nations. But the amount of finished petroleum products exported from the PADIII region in 2008 was slightly more than the amount produced offshore. The data for 2009 is incomplete, but offshore oil production was slightly more than half of all oil produced in the Gulf Coast PADD, while exports of finished petroleum products were slightly less than half of all oil produced there.

In other words, the amount of oil produced offshore in the Gulf Region is only slightly more than total exports of finished petroleum products from that region.

A likely explanation for why the oil we’re producing is converted to finished petroleum products and shipped to other places is that oil is an international fungible commodity that is frequently traded between nations. The United States exports oil products to and imports oil from some of the same nations. For instance, Canada is the largest oil exporter to the United States, and the second-largest importer of American finished petroleum products.

The BP oil disaster, however, exposed the enormous costs of a serious offshore blowout, and it begs the question: Does it make sense for the United States to bear the health, economic, and environmental costs of this offshore production for oil that is made into diesel fuel, gasoline, and other finished products and then shipped elsewhere? If our oil needs are so great that we must open sensitive, formerly protected areas to drilling, finished products made from this crude oil should remain in the United States whenever possible for domestic consumption. But not all of them are.

The most cost-effective way to address our oil needs is to reduce oil demand via significantly more fuel efficient vehicles, alternative fuels such as advanced biofuels and natural gas, and investments in public transportation. This approach poses far fewer risks than drilling for oil a mile under the ocean’s surface where a blowout like the BP oil disaster can cause billions of dollars of economic damage. Provisions to significantly reduce oil use must be part of any bipartisan comprehensive clean energy and climate bill.

* Correction, May 10, 2010: The original column compared Gulf Coast region oil production to the region’s oil exports, when it was intended to compare regional oil production with finished petroleum product exports.

Daniel J. Weiss is a Senior Fellow and Jacob Abraham is an intern with the Energy Opportunity team at American Progress.

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