As the U.S.-Iran war has dragged on, U.S. energy exports hit a record high. With the Strait of Hormuz blocked and imports of Middle Eastern energy hampered, Europe and Asia have turned to buying U.S. energy as a substitute. Still, analysts said this reflects a temporary demand bump from the war and is unlikely to be a sustainable growth driver.
On the 24th, the Wall Street Journal (WSJ) reported that Europe and Asia are leading purchases of U.S. crude oil and liquefied natural gas (LNG). With the Strait of Hormuz shut due to the U.S.-Iran war and Middle Eastern energy purchases blocked, U.S. energy has emerged as a substitute.
According to the U.S. Energy Information Administration (EIA), U.S. exports of crude and petroleum products averaged 12.9 million barrels per day last week. That is a record high. Shipping data firm Kpler found that U.S. crude and LNG exports to Asia last month and this month rose about 30% from a year earlier.
Energy experts, however, see this as a temporary phenomenon. Many Asian countries' refineries are designed for Middle Eastern crude, limiting their ability to process U.S. crude. In particular, running lower-density U.S. crude in the same facilities reduces efficiency, and retrofitting infrastructure would inevitably require massive expense.
There is also concern in Europe that, given U.S. President Donald Trump's unfavorable view of Europe, rising dependence on U.S. energy could be risky. Henning Gloystein, head of energy at Eurasia Group, said, "Under the Trump administration, the United States could abuse energy dependence as leverage for its own interests on climate policy, North Atlantic Treaty Organization (NATO) issues, security, and tariff matters."
Washington recognizes this as well. In practice, the United States cannot simply ramp up energy exports without limit. Crude export facilities in Texas and Louisiana are hitting physical limits on loadings, and by the time new infrastructure comes online, the appeal of U.S. energy may have faded.
Tsuneo Watanabe, a researcher at the Sasakawa Peace Foundation, a Japanese think tank, predicted that once the Strait of Hormuz reopens and Middle Eastern energy prices normalize, U.S. crude and gas will no longer be attractive.