The coming made-in-US oil crunch: Energy diplomacy rests on supply illusion

At a Senate hearing on September 12, Sergio Gor, Donald Trump’s nominee for US ambassador to India, said that Washington would push New Delhi to buy more American crude oil, refined products, and LNG as part of ongoing trade talks. This is not new. For the past two years, Mr Trump and his team have pressed India and other nations to stop buying Russian oil and shift to US barrels. 

Energy demands in every deal 

Washington has embedded energy-purchase pledges into its recent trade deals. The European Union has promised to buy roughly $750 billion of US oil, gas, and nuclear fuel over three years — about $250 billion annually. Japan has pledged $7 billion a year, mainly LNG. Britain has signed a 10-year gas deal for 50,000 MMBtu a day, starting 2028, roughly five LNG cargoes a year. Vietnam is lining up 9 mtpa of LNG imports from the US by 2030, and Thailand has signed a 20-year contract for 2 mtpa of US LNG. 

The supply illusion 

But there’s a problem. The US is still a net crude importer — the same product it is urging others to buy. Washington wants to block Russian barrels, keep prices low, and somehow become the world’s top oil supplier. The math doesn’t work.

The 2024 trade data are telling. The US exported $298 billion of petroleum crude and products and imported $246 billion, thanks to big surpluses in refined products and LNG. But in crude oil, it imported $174.4 billion and exported $114.5 billion — leaving a $60 billion deficit. America remains a net crude buyer. 

Let’s understand why the US both exports and imports large quantities of crude oil? The reason is structural. Most US crude oil output is light, sweet shale oil, whereas many Gulf Coast refineries — concentrated in Texas and Louisiana — were designed decades ago to process heavier, sour crude from Venezuela, Mexico, and West Asia. To keep those refineries running efficiently, the US keeps importing heavy crude oil while exporting locally produced shale oil, a light crude oil, to Europe and Asia. 

Shale’s fragile future 

The US shale boom is no bottomless well. Unlike conventional crude pumped from underground reservoirs, shale oil is extracted from rock using fracking — blasting high-pressure water, sand, and chemicals — and horizontal drilling. Wells decline fast, losing 60–70 per cent of output in the first year, and production stays viable only when prices are above roughly $55 a barrel. Below that, drilling slows and output shrinks. That makes shale a costly, fragile substitute for Russian oil. Building the world’s energy security on US shale could backfire if prices fall, investment dries up, and supply rolls over. Brent crude is currently about $66.80 a barrel — comfortably above the survival line but not high enough to guarantee a drilling boom. 

A looming energy crunch 

Washington under Mr Trump has flipped from shunning fossil fuels to a “drill baby drill” strategy, seeking to turn the US into the world’s gas station — even as it remains a major oil importer. Its approach has two pillars: Forcing allies to buy US crude and LNG, and punishing those who buy Russian oil.  

India has been hit with 50 per cent tariffs for continuing Russian purchases. Europe has pledged to cut Moscow out of its energy mix and replace those barrels with US supply. Washington is threatening sanctions on any country buying Russian crude. But US production cannot grow fast enough to replace the more than 10 per cent of global oil supply that comes from Russia. The result could be a dangerous mismatch — too little oil, too much pressure — pushing the world towards a fresh energy crisis and painful price spikes. 

India’s position 

India’s oil basket is diversified: Russia supplied $52.7 billion or 37 per cent in 2024, with Iraq, Saudi Arabia, the UAE, Nigeria, and the US also key. India imported crude, products, and LNG worth $7.7 billion from the US, and overall ran a $3.2 billion deficit. Losing cheaper Russian oil means costlier West Asian or US crude, yet Indian refineries can’t easily process light US shale without costly upgrades. But, Russian oil is only part of the friction between the two countries. Washington has cranked up the pressure on India with 50 per cent tariffs, a 100-fold H-1B visa fee hike to $100,000 per worker, sanctions on Chabahar, and a Supreme Court filing naming India’s Russian oil imports — all designed to force India to accept one-sided US demands. While leaders from both sides express optimism for an early deal, the US is making the task ever more difficult as time passes. 

Pragmatism over pressure 

In the end, global energy security cannot be built on politics or pressure alone. Stability comes from realistic supply commitments, flexible trade, and respect for partners’ choices. If Washington wants to lead responsibly, it must move from coercion to cooperation — or risk turning today’s market strains into tomorrow’s full-blown energy crisis.

 

The author is the founder of GTRI