196 PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
Generally, crude oil and petroleum products flow to the markets
that provide the highest value to the supplier. Everything else being
equal, oil moves to the nearest market first, because that has the
lowest transportation cost and therefore provides the supplier with
the highest net revenue, or netback. If this market cannot absorb all
the oil, the balance moves to the next closest one thence to the next,
incurring progressively higher transportation costs, until all the oil
is placed.
Because of the political instability of the Middle East, policy makers in the United States have viewed this increased dependence on
the Western Hemisphere as the major supplier of crude oil to the
United States, and the decreased dependence on the Middle East
crude oil, as a welcome development. In fact, the recent growth in
United States dependence on its Western Hemisphere neighbors is
considered by some to be an illustration of this nearer-is-better syndrome because the Western Hemisphere sources now supply over
half the United States import volume, much of it on voyages of less
than a week. Another quarter comes from elsewhere in the Atlantic
Basin (countries on both sides of the Atlantic Ocean) and takes just
two to three weeks to reach the United States. Another view is that
the importers in the United States are also seeking sources of oil that
are, for the most part, controlled by relatively stable governments.
As a result of the shift by the United States toward sources of
crude oil in the Western Hemisphere, Saudi Arabia is the only significant Middle East supplier left. Although the dependence of the
United States on the long-haul Middle East has fallen sharply, this
has not made prices in the United States vulnerable to a disruption
in Middle East supplies.
Mexico and Venezuela have consciously helped the trend
toward short-haul shipments.They pro-actively took the strategic
decision to make as large and as profitable a market as possible
for poor quality crudes, since their reserves are unusually biased
toward those hard-to-place grades. Both countries began with
refineries that had traditionally run their own crudes, and then
with refineries that might be upgraded to handle heavier crude
oils. This has turned low API gravity high sulfur crude oil into the
preferred crude oil at these sites, significantly increasing the crude
oil self-sufficiency of the Western Hemisphere. Nevertheless, the
political stability of both governments is always open to speculation. However, in practice, the direction of crude oil trade does
not always follow the nearest first pattern. Refinery configuration,
Generally, crude oil and petroleum products flow to the markets
that provide the highest value to the supplier. Everything else being
equal, oil moves to the nearest market first, because that has the
lowest transportation cost and therefore provides the supplier with
the highest net revenue, or netback. If this market cannot absorb all
the oil, the balance moves to the next closest one thence to the next,
incurring progressively higher transportation costs, until all the oil
is placed.
Because of the political instability of the Middle East, policy makers in the United States have viewed this increased dependence on
the Western Hemisphere as the major supplier of crude oil to the
United States, and the decreased dependence on the Middle East
crude oil, as a welcome development. In fact, the recent growth in
United States dependence on its Western Hemisphere neighbors is
considered by some to be an illustration of this nearer-is-better syndrome because the Western Hemisphere sources now supply over
half the United States import volume, much of it on voyages of less
than a week. Another quarter comes from elsewhere in the Atlantic
Basin (countries on both sides of the Atlantic Ocean) and takes just
two to three weeks to reach the United States. Another view is that
the importers in the United States are also seeking sources of oil that
are, for the most part, controlled by relatively stable governments.
As a result of the shift by the United States toward sources of
crude oil in the Western Hemisphere, Saudi Arabia is the only significant Middle East supplier left. Although the dependence of the
United States on the long-haul Middle East has fallen sharply, this
has not made prices in the United States vulnerable to a disruption
in Middle East supplies.
Mexico and Venezuela have consciously helped the trend
toward short-haul shipments.They pro-actively took the strategic
decision to make as large and as profitable a market as possible
for poor quality crudes, since their reserves are unusually biased
toward those hard-to-place grades. Both countries began with
refineries that had traditionally run their own crudes, and then
with refineries that might be upgraded to handle heavier crude
oils. This has turned low API gravity high sulfur crude oil into the
preferred crude oil at these sites, significantly increasing the crude
oil self-sufficiency of the Western Hemisphere. Nevertheless, the
political stability of both governments is always open to speculation. However, in practice, the direction of crude oil trade does
not always follow the nearest first pattern. Refinery configuration,