ARI SHAPIRO, HOST:
When President Trump spoke at the White House yesterday about the Iranian attack on two military bases in Iraq, he made this comment about energy.
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PRESIDENT DONALD TRUMP: We are now the No. 1 producer of oil and natural gas anywhere in the world. We are independent, and we do not need Middle East oil.
SHAPIRO: The first part of that statement is true. The second is not. Helima Croft joins us from Abu Dhabi to explain. She's managing director and global head of commodity strategy at RBC Capital Markets.
Hi, there.
HELIMA CROFT: Hi, Ari.
SHAPIRO: Let's start with the first part of the statement. President Trump says the U.S. is now the No. 1 producer of oil and natural gas in the world, which is true. When did that happen?
CROFT: Well, we've seen a really big surge in U.S. production over the last decade. U.S. production has more than doubled. And before the shale story, U.S. production was on a pretty significant decline path. But now we are talking about, you know, the significant growth of U.S. production. And we've actually become a net exporter of crude.
SHAPIRO: You're referring to shale. That's fracking technology which has just emerged in the last decade or so.
CROFT: Absolutely. It's been - emerged because of this sort of entrepreneurial spirit of a bunch of independent producers in the United States.
SHAPIRO: Is the reason that the U.S. has become the top producer of oil different from the reason the U.S. has become the top producer of natural gas?
CROFT: Well, I mean it's all largely the story of the shale boom. It's the sort of fracking story that we talk about in Texas, in North Dakota, in parts of Ohio. So it is a broad shale story.
SHAPIRO: So Trump says the fact that we are No. 1 means we are independent and do not need Middle East oil. That's not true, but it's not obvious why. Explain.
CROFT: Well, we say something in our markets - that crude quality matters. U.S. oil is a light, sweet oil. Our U.S. refineries, particularly in the Gulf Coast, are geared - many of them - to take a heavier barrel. Those barrels tend to come from the Middle East. They also come from Latin America. And so what we export tends to be those light barrels.
We still take in, you know, relatively significant quantities of imports - for example, from the Persian Gulf. It's been on a decline path. So for example, in 2001, the U.S. imported about 2.8 million barrels a day from the Gulf. By 2018, that figure had fallen to about 1.5 million barrels a day. And if we look at the first 10 months of 2019, that import figure had fallen down to about 906,000 barrels a day.
SHAPIRO: So imports are going way down.
CROFT: They are going way down, but we still need them. And the second part of why we're still dependent on the Middle East is the price impact. Oil is globally traded commodity. So if we get a major supply disruption in the Middle East and it's prolonged, we'll still feel the effects in the United States. Five years ago, if we had the type of disruptions we've seen in the Middle East since May, prices would be above 100.
SHAPIRO: Wow.
CROFT: Now there's a lower ceiling on prices. But still, we're not immune from the impact of disruption in the Middle East.
SHAPIRO: If some external event happened and suddenly the U.S. could not import any oil at all, would the U.S. be able to get by on just domestically produced oil? Is it that we choose not to or that we really can't?
CROFT: Well, what we would do in the case of a really prolonged supply disruption - we would probably release first from the Strategic Petroleum Reserve. We have the largest stockpile of emergency crude in the world. But certainly, if you think about a situation where you had the Middle East off the market, that would be a huge problem for the United States.
And one of the things that we think about in terms of our relationship with countries like Saudi Arabia is Saudi Arabia is the only country that sits on spare capacity. U.S. production is, like, just in time production. It cannot surge production quickly. Saudi Arabia holds barrels in reserve. They have an installed capacity of about 12.5 million barrels a day. They're currently producing under 10 million. They are the central banker of oil. They're really the only country that can bring it on quickly in terms of barrels, you know, in an emergency situation.
SHAPIRO: OK. So the U.S. has become much less dependent on foreign oil over the last decade. Do you foresee a time when the U.S. will be totally independent?
CROFT: Even if the U.S. continues to produce, we would have to have a situation where we had ample supplies in reserve beyond the Strategic Petroleum Reserve to be in that type of situation. So again, I think that we've become more self-sufficient. But the idea that we are completely walled off from what's happening in the rest of the world in terms of global crude markets, I think we're not going to get to that point anytime soon.
SHAPIRO: That's Helima Croft, managing director and global head of commodity strategy at RBC Capital Markets.
Thank you for explaining this to us.
CROFT: Thank you. Have a good day. Transcript provided by NPR, Copyright NPR.