The U.S. is the world’s largest oil producer. You’ll still pay more for gas. (2024)

But the oil cut raised a question. Over the past few decades, various presidents have stressed the importance of U.S. “energy independence.” (Former president Donald Trump famously claimed that under his term, the U.S. achieved energy independence, only to lose it under President Biden.) Since 2018, however, the United States has been the largest producer of oil and gas in the world and a net exporter — the country exports more than it imports. Why, then, do U.S. oil prices hinge on the actions of an international oil cartel?

The answer — like the global oil market — is complex.

The most straightforward answer, according to Ann-Louise Hittle, vice president of oils research at the research and consultancy company Wood Mackenzie, is that U.S. demand still outstrips its own supply. “We’re the world’s largest producer, but we’re also the world’s largest consumer,” she said. The U.S. produces 18.8 million barrels of oil per day but consumes slightly more — 20.5 million barrels per day. (The world as a whole consumes about 100 million barrels per day.) That difference means that no matter what, the U.S. has to purchase oil on the global market. So when supply in the market contracts slightly — as it will with the decision from OPEC Plus — that can affect prices in the U.S.

And even if U.S. production exactly matched U.S. demand, the country would still be importing and exporting oil constantly. Crude oil can be heavy or light, sweet or sour, and those qualities affect how much it needs to be refined and for what uses. U.S. oil companies constantly export crude oil and import refined oil, and vice versa.

But there is another, more complicated explanation as well. “When it comes to insulating our economy from global oil price shocks, being a big producer means next to nothing,” said Bob McNally, the founder and president of the Rapidan Energy Group and the author of “Crude Volatility: The History and Future of Boom-Bust Oil Prices.”

“Real power in the oil market comes from being able to stabilize prices,” he said.

McNally argues that what matters most for stabilizing global oil prices is “spare production capacity” — defined as how much a producer can ramp up oil production within 30 days. That spare production capacity allows a producer to ramp up — or slow down — oil production basically at will, shifting global prices.

Saudi Arabia has a huge amount of spare production capacity: around 2 million barrels of oil a day. Once, the United States did have spare production capacity that was managed by the Texas Railroad Commission. But as more easily reached oil dried up — to be replaced by harder-to-reach shale oil — that power disappeared. Today, the United States’ spare production capacity is zero. U.S. oil producers, many of whom are beholden to their shareholders, can’t hold on to spare capacity in the same way as their Middle East counterparts.

Spare production capacity “is expensive to maintain, which is why no other producers maintain it,” said Hittle. In the U.S., she added, investors would never put up with spending capital to develop production and then letting it sit idle until the right moment.

Is there any solution to the United States’ role in the global market? Some researchers have suggested that the government could promise to buy more oil for the Strategic Petroleum Reserve, or SPR, a stockpile of hundreds of millions of barrels of oil that is supposed to help insulate U.S. consumers from oil price shocks. (Earlier this year, Biden ordered the release of 1 million barrels of oil a day in an attempt to lower oil prices.)

But experts say that the SPR is becoming worryingly depleted — and that it’s simply not a strong enough tool to counter the actions of OPEC. “It’s like bringing a squirt gun to a firefight with guys with guns,” McNally said. If the SPR becomes too drained, he argues, oil prices will rise even faster — and there will be no remaining buffer to protect U.S. consumers.

Biden has also urged oil producers in the United States to drill more to help lower prices — but the president simply doesn’t have authority to order companies to produce more. And oil companies, recently burned from price crashes in the beginning of 2020, are hesitant to repeat the same mistakes.

In the short term, McNally says, the best thing that the country can do is not make the situation worse. “There’s no magic wand for short-term price volatility,” he said. “It’s going to be a wild ride until we have a scalable, affordable and reliable alternative to oil for transportation.”