Monday Chart
The United States is halfway through its fifth year as a net energy exporter, and the financial contribution to its trade balance is really starting to land. After traveling for years in the range of $100 to $200 billion, the value of energy exports leapt $143 billion last year from from $276 billion to $420 billion as prices for coal, natural gas (LNG) and oil products spiked higher on the back of war-related disruptions. Volumes of energy exported advanced also, rising by almost 10% from the previou s year, as the US capitalized further on the opportunity.
We could even say the value of US energy exports is now a significant component of total US exports. US exports last year hit $3,108 billion, making energy’s $420 billion 13.5% of the total. The growth contribution from energy is even more impressive. US exports jumped $541 billion last year from 2021’s level of $2,567 billion, which means the energy export advance of $143 billion easily comprised more than 25% of total export growth. Yes, we are still exporting aircraft, filmed entertainment, and software, but clearly energy has muscled into the top tier.
Now, you may be wondering: if the US only became a net exporter of energy in 2019, then why are the export bars here all above zero, going back to 2002? Glad you asked. The chart here doesn’t record exports in energy terms: that data comes from the EIA in the Department of Energy. This chart is from the International Trade Agency, within the Department of Commerce. It’s also not a net measure of exports, and is a slightly more expansive data series that includes things like specialized nuclear parts, and gas meters. But those are tiny categories and the main event remains oil, petroleum products, natural gas—both by pipeline and shipped LNG—plus coal, and electricity.
Note: The Gregor Letter has offered the (net) energy exports chart quite frequently of late and it’s actually received some media attention. So no need to flog that again here. But if you’ve not seen it, there’s a recent copy in the final essay of the 26 June issue: Portfolio Nuclear.
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One of the moderately counterintuitive outcomes of energy transition is that a country like the United States will be able to more easily increase its exports of fossil fuel energy as its own consumption stagnates, and then falls. We saw this early on with US coal exports which began to rise substantially, to a new record, as we killed coal-fired powerplants in the US starting a decade ago. More recently, the heady growth of wind and solar power means we’re able to free up more natural gas for export via our LNG capacity. And when petroleum consumption finally falls the US will have even more oil and oil products to export. That particular tipping point is not here yet, but now that California petrol demand has finally entered decline, the signal has arrived. Probably worth mentioning: US production volumes of natural gas, crude oil, and petroleum liquids are not only back at all time highs, but are going higher.
When the Obama administration gave birth to the US LNG export industry in a succession of FERC approvals starting in 2014, your correspondent theorized that adding natural gas to the export arsenal would likely mean a boost to the country’s geo-political power. Indeed, we saw the US use both levers during Russia’s invasion of Ukraine. The US cut off petrol imports from Russia, boosted LNG exports to Europe in a wave reminiscent of a wartime airlift, and….it actually looks like we got the third lever going also, as coal exports rebounded sharply.
Now that the US has gotten a taste of such power it’s not likely to let it go. US total consumption of fossil fuels peaked in 2005 and the composition since has been lumpy: coal use has crashed, natural gas use has soared, and oil use has plateaued. As mentioned, domestic demand tailing off further in the future will just make the export lever even easier to utilize. This also implies that US fossil fuel producers, when thinking about whether to invest in the new, marginal barrel, need to focus almost solely now on global demand, not US demand.
—Gregor Macdonald
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