President Trump might have to hold his nose but it appears he has an ally in his effort to fight Russian and Saudi efforts to throttle the U.S. oil-exporting industry: China.
For the last four months, China — on the receiving end of more vitriol than any other country during Trump’s presidency — has bought more U.S. oil than any other nation, according to U.S. data released Tuesday. That’s notable since, prior to May, China had ranked first only three months and never two in a row.
Prior to May, China had last ranked No. 1 among buyers of U.S. oil in March 2018, just as Trump launched the trade war that eventually engulfed not only oil but U.S. soybeans and other commodities.
Oil and soybeans
‘President Xi Jinping chose soybeans in particular to retaliate against U.S. tariffs placed on Chinese imports because they came from Iowa and other reliably Republican states.
The same could be said for oil, much of which is coming from deep beneath Texas soil via a hydraulic-fracturing boom that led former President Obama to end restrictions on oil exports that had been in place since the early 1970s.
Texas has also been reliably Republican since the last Texas Democrat to serve in the White House, Lyndon Johnson, in the 1960s, though some polls suggest the race between President Trump and former Vice President Joe Biden in the Lone Star state to be tightening.
Texas has been particularly hard hit by not only the trade war but also the global Covid-19 pandemic, as oil consumption as suffered with fewer people flying or driving.
Saudi, Russian efforts
Add to that the efforts by the Saudis and Russians to drive down prices by flooding the market with oil in an attempt to topple the United States’ new stature as the world’s largest oil producer.
Enter the Chinese.
Beginning in May and continuing in June, July and now August, the latest data available, China topped Canada to rank first.
In fact, in May, when overall U.S. trade fell a stunning 29.84% from the previous May, U.S. oil exports to China topped $1 billion for the first time, more than double the total from 12 months earlier.
Historically, Canada has been the largest buyer of U.S. oil — and the United States has long depended on Canada for more than two times as much oil as any other nation, despite common misperceptions about a dominance of Middle Eastern oil to the United States.
China’s increasingly important role
But that U.S. dependence on Canada is diminishing, though exports to our northern neighbor have actually increased — just not as rapidly as to the rest of the world.
Canada accounted for more than 90% of all U.S. oil exports as recently as 2015, when those exports were still highly restricted. The total that year was $8.82 billion. In 2019, just four years later, U.S. oil exports topped $65.02 billion.
For the month of August alone, U.S. oil exports topped $4.2 billion, or about half the total for all of 2015.
While those exports to Canada have increased, its percentage of U.S. exports fell under 60% in 2016, to 30.56% in 2017, to 21.38% in 2018 and to 15.80% in 2019. This year, through August, that percentage is a record low 12.45%.
In 2015, China accounted for less than one-quarter of 1% of all U.S. oil exports. That soared o 19.17% in 2017, the last full year without a trade war.
That percentage dropped to 11.27% in 2018 and diminished to 4.55% in 2019.
Through the first seven months of 2020, China’s percentage is just shy of Canada’s 12.45% at 10.29%, putting the two countries almost on par for the first time ever.