This wasn’t precisely the news we wanted to hear, but it’s also not entirely unexpected. During the third quarter of the year the United States experienced a shift in oil imports after a couple of years of being a net exporter of oil and other energy products. Thanks to transitions in the global market and depressed prices, we’re back to importing more foreign oil than during the initial spike in domestic production. (UPI)

The U.S. Energy Department said it expected more crude oil will enter the country from foreign countries in part because U.S. oil was less cost effective.

During the first half of the year, the U.S. Energy Information Administration, part of the Energy Department, said total crude oil imports increased 7 percent year-on-year. The increase marks a first since 2010, when imports started to decline in response to rising domestic output.

By region, EIA said imports from members of the Organization of Petroleum Exporting Countries increased by 504,000 barrels per day, making up the bulk of the new oil entering the U.S. economy. Declines from Mexico were offset by more imports from Canada, making the net gain from non-OPEC countries less than 24,000 bpd.

Before anyone goes into too much of a panic, this doesn’t represent a weakening of American energy production capability. Our own production rates are slowly recovering following a dip from peak 2014 levels when prices bottomed out, but there are a few other factors in play here. Part of it is OPEC finally stepping up their production again, with increased contributions from Iran being a portion of that. (Thanks, John Kerry and Obama!) But their total contribution remains small compared to the more favorable deals we have with Canada. We’re also importing more from Venezuela, which seems counterintuitive because once we partially lifted our export ban they actually began importing oil from us. But in the end it all comes down to the free market and where oil is the cheapest. When our prices are at rock bottom, they buy from us and when it reverses, the flow goes the other way.

One persistent problem is that the United States still runs in a free enterprise system and there’s a minimum amount our producers can sell for, below which a profit is essentially impossible. More authoritarian states have a distinct advantage in that regard because you can get the product out of the ground a lot more easily if you are being subsidized by the government and have what is essentially slave labor available. So how can we fix this? We still have too many restrictions on exports, not only of crude, but for natural gas and all other related products. The more we open up foreign markets to American energy, the better our position becomes. As demand rises, price stabilization follows.

It’s not all bad news, though. The U.S. rig count is still going up, albeit slowly, with last week seeing an increase to 528 total land and ocean oil rigs, up from a low of barely over 400 last year. That’s good news on multiple fronts because it demonstrates a willingness to invest on the part of American energy interests and new jobs across multiple regions. This is going to be a slow process, but it’s heading in the right direction for the most part, so a temporary rise in imports is nothing to get flustered over. Now if we can just get Congress to work a bit harder on expanding our export outlook we should be in good shape.

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