It was a gusher few expected.
What began as a trickle of U.S. crude being sold to China is turning into a flood, the result of a surprise American glut that has made the country's oil cheaper than Mideast rivals just two years after Congress lifted a 40-year export ban.
China, one of the world's largest oil importers, bought nearly 100,000 barrels of oil a day from the U.S. in the first five months of 2017--10 times the average in 2016. Imports in April and May surged to more than 180,000 barrels a day on average, China customs data show.
The shift has been greeted with enthusiasm by American producers, who have been trying to pull the sector out of a three-year price slump that has sapped profits and jobs.
Industry executives and local officials are now scrambling to retool ports in the Gulf of Mexico to accommodate the large vessels needed to ship vast quantities of crude around the globe.
While still far below the figure China pays its top suppliers--Russia, Saudi Arabia and Angola--the bill for U.S. oil could come in well above $1 billion this year, up from $150 million last year, according to customs data.
A confluence of factors has helped open the taps.
Falling production from China's own aging fields has forced the country to step up its hunt for new sources of crude. Imports are up 13% this year through May, compared with a year earlier, according to customs data.
The search came as America was opening oil exports in 2015 for the first time in four decades amid a boom in U.S. oil drilling, upending petroleum flows.
Political uncertainty in the Middle East, including the decision last month by Saudi Arabia and other Arab nations to cut ties with Qatar, also has played a role.This reminds me of the grief the pundits gave SecEnergy Rick Perry when he said the other day:
“Here’s a little economics lesson: supply and demand,” Perry said at the Longview Power Plant. “You put the supply out there and demand will follow.”About the only thing this does not work for is intermittent energy: put the supply out there (wind farms and solar farms) and folks still don't want intermittent energy if it's going to cost three times what coal or natural gas wil cost.