US reliance on Saudi oil is nearing its endgame

By Javier Blas

For decades, one of Saudi Arabia’s most strategic overseas outposts was a little-known office in New York City that coordinated its oil sales to American clients. An anonymous suite in Madison Avenue was the invisible hand gluing the petrostate to the US.

Until it wasn’t.

Last year, Riyadh closed its New York oil office – a sign of the twilight of Saudi crude in America. Thanks to the shale revolution and the rise of the Canadian oil industry, US imports of Saudi crude plunged to their lowest in almost 40 years in 2024, according to Bloomberg Opinion calculations based on customs data. The flows are unlikely to recover anytime soon — if ever.

The rhetorical aspiration of generations of US politicians, from Jimmy Carter to George W. Bush, is within reach: freedom from Saudi oil. For incoming President Donald Trump, it presents a white canvas to redo foreign policy in the Middle East in ways that his predecessors could only dream of. The US isn’t completely free from the ups and downs of the oil market — but the influence of Saudi Arabia via its crude reserves is significantly diminished.   

The US bought roughly 277,000 barrels a day of Saudi crude last year, down nearly 85% from a record high of 1.73 million barrels a day in 2003. To find lower imports, one must travel back to 1985, when flows briefly plunged as the kingdom cut output to try to push oil prices higher. To find several years of similarly low imports, one must go back all the way to the late 1960s.

The collapse in Saudi-US oil flows will deepen further in 2025 as one of the five refineries that has been regularly importing the barrels closes, according to custom documents. Lyondellbasell NV is shuttering its Houston plant this quarter, leaving only four consistent clients for the kingdom’s oil in America.

The remaining plants are the Motiva refinery near Houston, owned by the Saudis themselves via their state-owned oil company; a refinery run by Chevron Corp. near Los Angeles, and two plants owned by PBF Energy Inc. in New Jersey and Delaware. Motiva alone accounts for 40% of the Saudi crude the US imported last year.

The reduced number of buyers compares with two decades ago, when 25 (and, at times, even more) refineries regularly processed Saudi crude.

Over the last two years or so, the three largest refining US companies — Marathon Petroleum Corp., Valero Energy Corp. and Exxon Mobil Corp. — have all stopped importing Saudi crude, according to customs data. Exxon last bought Saudi crude in November 2023, according to government trade records reviewed by Bloomberg Opinion. Because Saudi Arabia sells its barrels under long-term contracts, often stretching five to seven years or longer, the stoppage suggests those companies didn’t renew their long-term contracts, ending decades-long relationships.

When President Bush said during his 2006 State of the Union address that “America is addicted to oil” and set a goal of replacing 75% of the nation’s oil imports from Saudi Arabia and other Middle East nations by 2025, few thought that was realistic. Back then, the Saudi-US relationship was at its zenith, with imports running at more than 1.5 million barrels a day.

Bush got many things wrong with his energy policy. For example, he bet on biofuels as the main driver to reduce his country’s dependence on foreign oil, plus a very early push into electric vehicles. In reality, it was the US shale revolution and the accompanying “drill, baby, drill” entrepreneurial culture that did the job, along with a boom in Canadian production, which overtook Saudi Arabia in 2004 as America’s main foreign oil partner. Nevertheless, the US has not only achieved what Bush wanted, but has exceeded his goal: Since that address to Congress almost two decades ago, US imports of Saudi crude are down more than 80 per cent.

As tempting as it may be to write off Saudi oil, that would be a mistake. Riyadh remains a formidable geopolitical force, still able to influence the price US drivers pay at the fuel pump by increasing or decreasing production. Because oil is a fungible commodity traded in a global market, what the Saudis do still reverberates in America, regardless of the amount of crude the US imports from the kingdom.

The reduction in Saudi-US flows isn’t completely the work of the shale revolution, either. The Saudis have purposely priced their oil out of the American market by asking US refiners to pay a huge premium for the barrels. For much of 2023 and 2024, Riyadh set the premia for Arab Light, its flagship export oil grade, at $5-a-barrel above the reference for US sales, much higher than historical levels. Riyadh has used its official selling prices to deter flows into America as a tool to reduce the country’s oil inventories, which are closely watched by traders. As such, low Saudi-US flows form part of the OPEC+ output cuts.

But the truth is unmissable. The sun is setting on one of the most important geopolitical trends of the last half-century: The US is finally gaining independence from its reliance on Saudi Arabian crude.