US crude reliance on South America

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As President Trump signs executive orders which pave the way for the Dakota Access and Keystone pipelines to move forwad, prices are running higher once again. Hark, here are five things to consider in energy markets today:

1) Yesterday we looked at how Arab Gulf crude imports to the U.S. totaled nearly 2 million barrels per day last year; today we take a peek at flows from South America. Venezuela leads the charge, accounting for nearly half of the 1.58mn bpd that arrived on U.S. shores from South America last year.

Colombia is the second largest source, accounting for over a quarter of the barrels, sending primarily heavy sour Castilla and medium sour Vasconia. Ecuador accounts for 228,000 bpd, sending heavy sour Napo and medium sour Oriente. Virtually all crude flows from South America to the U.S. are medium or heavy, with heavy crude accounting for 60 percent of total barrels.

Given that U.S. refineries are geared towards heavier crude from Latin America and the Arab Gulf, rising U.S. production (aka light crude) could not be directly substituted for these heavier barrels…at least not without some extensive refinery retooling. As we said yesterday, imports are here to stay.   

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2) File under random but interesting: the Chinese Ministry of Industry and Information Technology (MIIT) has issued an updated list of recommended green vehicles, which will be able to receive government subsidies this year. The government is spending billions of dollars to promote electric and plug-in hybrids – to be both competitive globally, and to also reduce pollution. Given China has the largest – and growing – auto market in the world, these are key developments to keep an eye on.

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3) With talk of the new President easing regulations on drilling on federal land, there is a timely piece from the EIA on how much revenue the government currently collects from energy production activities on federal land. For the last fiscal year, the government collected $6 billion in revenues from royalties, rental costs, and other fees; royalties made up for the lion’s share, accounting for 86 percent of the total.  

Crude oil royalties account for