Oil is a critical resource for the U.S. economy. It meets nearly 40% of total U.S. energy needs, including 94% of the energy used in transportation and 40% of the energy used by the industrial sector. Unlike other forms of energy such as coal and natural gas, which are largely supplied from domestic sources, net imports from foreign sources meet 45% of U.S. oil consumption, and thus the basis of many of the nation's energy security concerns. The United States has been concerned about dependence on foreign oil since it became a net oil importer in the late 1940s. Those concerns grew with import levels, especially in periods of high or rising oil prices. Nonetheless, imports have generally increased over the last six decades, except for a period following the oil spikes of the 1970s and again in the last six years. Net oil import volumes and share of consumption peaked in 2005 and then declined through 2011 as a result of economic and policy-driven changes in domestic supply and demand. See Figure 1 . However, oil total (or aggregate) import costs have increased due to rising prices, which more than offset the savings from lower import volumes. Net imports are gross imports minus exports (it is also the difference between domestic demand and supply). Interest in oil imports has climbed again as oil prices rebounded in response to global economic recovery in 2009-2010 and unrest in the Middle East and North Africa in 2011 (Libya, Egypt) and 2012 (tensions with Iran). Attention to oil exports grew in 2011, when the United States became a net exporter of petroleum products at a time when petroleum product prices were rising. Though it remains a large net importer of oil due to the need for crude oil from abroad, the United States recently started exporting more petroleum products than it imports. The U.S. oil supply-demand balance is presented for context in Table 1 . It shows U.S. oil consumption and production as well as the resulting net imports, gross imports, and exports: In 2011, the United States consumed 18.8 million barrels a day (Mb/d) of petroleum products, down 2 Mb/d or 9% since 2005. The decline was widespread among petroleum products, including gasoline, distillates (includes diesel and heating oil), and jet fuel. Domestic production of oil and related liquid fuels was 9.2 Mb/d in 2011, up 1.8 Mb/d or 24% since 2005. The increase was led by higher production of onshore crude oil in the lower 48 states, fuel ethanol, and natural gas liquids. As a result of lower consumption and higher production, the need for imported oil fell. Net imports fell from 60% of domestic consumption in 2005 to 45% in 2011. The 4.1 Mb/d decline in net imports over in six years reflected a 2.4 Mb/d decline in gross imports and a 1.8 Mb/d increase in exports. Gross imports fell 17% since 2005, including declines in both crude oil and petroleum products imports. Gross oil exports increased by about 150% since 2005. U.S. gross exports were equal to about 15% of the U.S. oil market in 2011. This report first explains these oil import and export volumes, including sources and destinations of traded oil. It then turns to the value of oil trade in the total U.S. trade balance for goods and services. Finally, several key policy issues regarding imports are discussed. The United States both imports and exports oil. It imports both crude oil and petroleum products. Oil exports are almost entirely in the form of petroleum products as a result of economic and policy factors. The United States imported 11.4 Mb/d of oil in 2011. This included 8.9 Mb/d of crude oil and 2.4 Mb/d of petroleum products (see Table 2 ). Gross imports peaked in 2005 and have fallen five of the following six years. The decline was split between crude oil and petroleum products. Gross imports are at their lowest level since 2002. More than a third of U.S. gross imports came from Canada and Mexico in 2011. About 40% came from members of the Organization of the Petroleum Exporting Countries (OPEC), though most of this is from OPEC countries outside the Persian Gulf, such as Venezuela, Nigeria, Algeria, and Angola. (See Figure 2 .) Imports from OPEC countries are nearly all crude oil. Imports from Non-OPEC countries are also mostly crude oil, though the United States does import some petroleum products from Canada, Europe, and Asia. Oil trading patterns can shift due to market conditions, but much of the oil that companies import to the United States comes from the same countries month to month. While many kinds of crude oil are interchangeable to some degree—which reinforces the globally integrated nature of the oil market—each has unique characteristics. Refineries optimize their operations for particular grades of crude oil. Proximity, infrastructure, and trading relationships may also contribute to normal trade patterns and determine which crude oils are consumed in certain countries. Over the last several years, imports of oil from many countries fell with the general trend of falling imports. The decline in imports from some specific countries was exacerbated by their declining output. For example, declining oil output from Mexico, the United Kingdom, and Norway contributed to lower imports from those countries. Imports from OPEC can fall at times when OPEC curtails its output in its efforts to manage the oil market and oil prices as it did to stem falling oil prices in late 2008/early 2009. Despite the general downward trend in imports since 2005, imports from some countries did rise, including Canada, Colombia, and Brazil. Canadian imports rose from 2.1 Mb/d in 2005 to 2.7 Mb/d in 2011. The share of gross imports from Canada increased from 16% to 24%. Regionally, the largest share of U.S. imports come into the Gulf Coast region, which also has about half of the refining capacity in the United States. (See Table 3 ; exports are discussed in the next section.) Much of that crude oil brought into the Gulf Coast is refined and sent to other parts of the country via pipeline. The Gulf Coast receives imports from around the world, and around 90% of these imports are in the form of crude oil. All regions of the country import more crude than petroleum products except for the East Coast, which received petroleum products from Canada, St. Croix, Russia, Europe, and elsewhere in 2011. Petroleum products imports into the East Coast are set to grow due to the closure of refining capacity in the U.S. Northeast. Several factors will complicate substitute sources of supply reaching the Northeast, especially in the near term, including constraints on import infrastructure and closure of several refineries in Europe and the Caribbean, traditionally sources of North East imports. More than half of the petroleum products imported into the East Coast are gasoline and diesel. Export of these products from the Gulf Coast has been growing. There are several barriers to bringing more of these products from the Gulf Coast to the East Coast rather than sending them abroad. First, pipeline capacity from the Gulf Coast to the Northeast is at or near capacity. There are plans to expand this capacity in the future. Second, seaborne movements are constrained in part by the Jones Act: Section 27 of the Merchant Marine Act of 1920 (P.L. 66-261) which requires trade between U.S. ports to be carried on U.S. flagged vessels built in the United States, owned by U.S. citizens, and crewed by U.S. crews. According to reports, the existing Jones Act tanker fleet is fully employed in existing oil trade between U.S. ports and little or no tanker capacity is available for additional shipments from Gulf Cost to the Northeast. The American Maritime Partnership, the trade association for Jones Act shippers, has responded that there is available barge capacity to carry additional petroleum products. According to an EIA report: Consider a trip from Houston to Philadelphia. A 325,000-barrel tanker has economies of scale that make it more economic than the smaller barge movements that typically move on this route. While terms may vary with specific circumstances, such a tanker might cost around 7 cents per gallon for a round trip. Articulated Tug Barges (ATBs) would be less efficient than tankers, but more efficient than a towed barge. A barge cost for this route might run around 15 cents per gallon, perhaps a little less for the ATBs and a little more for towed barges. Tankers are in high demand and are usually booked well ahead of time. ATBs and large barges would likely be used for some of the movements to the Northeast, at least initially. With transportation rates around 15 cents per gallon reportedly for Gulf Coast-Northeast barge movements, imports may be more economic for some of the needed volumes of Ultra low sulfur diesel (USLD). Foreign tankers are available, and a tanker moving product from Europe to New York Harbor (3,400 nautical miles) cost around 5-9 cents per gallon this past year, similar to the tanker costs from the Gulf Coast to New York Harbor. According to a U.S. shipping industry source, existing tankers currently engaged in relatively shorter routes, such as between Texas and Florida, could be diverted to routes between the Gulf Coast and the North East; the shorter routes may be taken up by available barge vessels. The price impacts of such a scenario are not clear. Separately, there are also infrastructure constraints on shifting from petroleum products supplied by regional refineries to seaborne and new pipeline sources. Issues involved in supplying petroleum products to the Northeast market are covered in detail in the EIA report Potential Impacts of Reductions in Refinery Activity on Northeast Petroleum Product Markets . Almost all U.S. exports are petroleum products, not crude oil, due to both policy (discussed below in " Export Restrictions on Crude Oil and Petroleum Products ") and commercial factors, particularly that the U.S. needs more crude than it produces. Market conditions—the needs (and ability to pay) of specific buyers and sellers in different parts of the world at a given time—can drive the export of some petroleum product cargos even when the United States generally imports oil. In recent years, moderating demand at home, the resulting available refining capacity, and rising demand abroad has led to rising U.S. exports of diesel and gasoline. Exports have increased from 1.2 Mb/d in 2005 to 2.9 Mb/d in 2011. The largest share of the increase has been in distillate fuels, which includes diesel and heating oil. (See Table 4 .) Export of gasoline has also increased. In 2011, more than 60% of U.S. exports went to countries in the Western Hemisphere. The largest recipients were Mexico, Canada, and Brazil. The United States is a net oil importer from all three—they send more crude oil to the United States than they receive in refined products from the United States. Of the 0.5 Mb/d of total gasoline exports, nearly 60% go to Mexico. Exports of other fuels are more diversified. See Table 5 for a list of major destinations for all oil exports. Exports occur as a result of commercial decisions by oil market participants which reflect current oil market conditions as well as past investment in refining. Export of crude oil is prohibited except in several specific cases, but there are almost no limits on export of refined product. Traditionally, most U.S. oil exports had been mostly heavier petroleum products, such as residual fuel oil or petroleum coke, for which there is limited demand in the United States, or products that do not meet U.S environmental standards. However, as shown in Table 4 , the growth in exports in recent years has been led by diesel and gasoline. At 2.9 Mb/d, total oil exports are equivalent to about 15% of the almost 19 Mb/d U.S. domestic oil market. The growth in exports of gasoline and diesel reflect shifting market conditions. U.S. oil needs declined due to the recession, high prices, greater fuel economy, and growth of ethanol. Meanwhile, rapid economic growth in emerging markets such as China has led to a robust increase in oil demand. Much of that demand growth in recent years has been concentrated in distillates such as diesel. Gasoline demand has also been relatively stronger in emerging markets, versus flat to falling demand in advanced economies such as the United States or Europe. However, advanced economies have been the traditional centers of demand in the global oil market. Industry has built refineries in those countries over decades to meet that demand. With demand at home weak and refining capacity already built, some refiners have looked to markets abroad. Rising exports at a time of rising prices for gasoline, diesel, and other refined products has prompted calls by some to ban export of refined products. This is discussed below in " Export Restrictions on Crude Oil and Petroleum Products ." Net oil imports—gross imports minus exports—fell from a peak of 12.5 Mb/d in 2005 to 8.4 Mb/d in 2011. Underlying this shift is a decline in crude oil imports and the shift from being a net petroleum products importer to an exporter. Net import volumes are at their lowest level since 1995. Crude oil imports were 8.9 Mb/d and exports were less than 0.1 Mb/d. Petroleum products imports were 2.4 Mb/d and exports were 2.9 Mb/d. Due to its large crude oil imports, the United States remained a large net importer of oil. See Table 6 . The United States is the world's largest oil importer, followed by China, whose net oil imports were about two-thirds that of the United States in 2011. Because some U.S. exports of petroleum products go to some of the countries from which the United States imports crude oil, such as Mexico and Brazil, the sources of net imports look different than the sources of gross imports. The United States export few petroleum products to OPEC members, so their share of net imports is larger than their share of gross imports. (See Figure 3 ; compare to Figure 2 .) A consensus is emerging among energy analysts that U.S. oil imports may be past their peak, reached in 2005. Further, some expect that imports may fall both in terms of absolute volumes and as a share of U.S. consumption. The EIA projects that net oil imports, already down by 4.1 Mb/d since 2005, will fall by an additional 1 Mb/d by 2020, leveling out at near 7.5 Mb/d through 2035 in its long-term forecast reference case. (See Figure 4 .) This forecast would correspond to net oil imports declining from 60% of domestic consumption in 2005 to 45% in 2011 and to less than 40% after 2020. Market analysts have reached the conclusion that import dependence will decline as the forces that pushed imports down in recent years become evident. While some of these recent forces are temporary—for example, those related specifically to the recession—some are expected to persist: high oil prices, rising efficiency, and greater domestic production of crude oil, natural gas liquids, and alternative fuels. The evolution over time of EIA import projections is illustrated in Figure 4 . However, even with import volumes flat, import costs may still rise if oil prices increase. Despite the decline in net import volumes, the cost of net imports has generally increased due to rising oil prices. The aggregate national cost of oil imports is a function of the volume of oil imported and exported and the price of that oil. The United States spent about $327 billion on net oil imports in 2011 (see Table 7 ). Despite lower import volumes, the cost has increased from the $229 billion spent in 2005, as well as amounts spent in 2009 and 2010 shown below. While fewer barrels were imported on a net (and gross) basis in 2011, each of those barrels cost more. The price increase more than offset the volume decrease with respect to total costs. The cost of net imports in 2011 was lower than the record high of $386 billion reached in 2008. While the per barrel cost of crude was 8% higher in 2011 than in 2008, net imports had declined by 24%. (In nominal terms, 2011 had the highest average annual oil prices ever, and the second highest price ever in inflation adjusted terms). Lower import volumes and higher export volumes contributed to keeping the net costs lower. These considerations prompt two questions: how oil import costs can affect the economy and why oil prices rose despite the decline in U.S. consumption and the rise in production. Being a net importer of a particular good is not necessarily negative for an economy: The United States imports many products because they would be more costly to consumers, businesses, or taxpayers were they produced domestically. But import dependence for an item can have negative economic impacts, particularly if it contributes to long-term trade deficits or when prices for that good increase. Trade deficits are ultimately financed by borrowing from abroad, which generates financial obligations for future repayment. Positive and negative impacts of trade deficits are explained in CRS Report RL31032, The U.S. Trade Deficit: Causes, Consequences, and Policy Options , by [author name scrubbed]. Greater national oil import dependence can also amplify the negative economic impacts of oil price increases. An increase in the price of crude oil can quickly translate to higher prices for petroleum products like gasoline. Rising oil product prices strain the budgets of households and businesses, reducing their savings and/or spending on other goods and services, some of which would have been produced domestically. Gasoline prices, in particular, are one of the most visible consumer prices, which may amplify their influence on consumers. For imported oil, that wealth is sent abroad, and only a portion of it is returned via now wealthier oil exporting countries buying more U.S. products. Even with oil from domestic sources, an oil price increase redistributes wealth within the economy from oil consumers to domestic oil producers, which may cause economic dislocation as businesses and workers adjust to the change. The impact can be exacerbated when the price change is faster as it makes the dislocations more abrupt. Economic analysts estimate that the impact of a sustained $10 per barrel increase in the price of oil could result in about 0.2% lower economic growth and 120,000 fewer jobs in the first year after the increase. Rapidly rising oil prices likely contributed to the U.S. economic recession in 2007-2008. If the United States were not a net importer of oil—if it produced as much oil as it consumed—rising oil prices would not increase the import bill, but would still negatively impact the budgets of many U.S. households and businesses. Wealth would be redistributed from oil consumers to oil producers within the economy. Oil prices paid by U.S. consumers for petroleum products would still be affected by international events as long as oil trade was permitted. Other impacts of higher oil prices, like inflation and unemployment, may continue to be economic concerns. The relationship between oil prices, oil imports, and the U.S. economy are discussed in greater detail in CRS Report R42024, Oil Price Fluctuations , by [author name scrubbed] and [author name scrubbed]. Rising oil prices have increased oil import costs despite falling oil import volumes. The increase in oil prices can be difficult to understand if looking only at the United States. As described above, U.S domestic production has increased and U.S. consumption has fallen (see Table 1 ). Understanding these changes requires looking at the global oil market. The oil market—both for crude oil and petroleum products—is globally integrated. More than 60% of global oil supply is traded internationally. Global oil prices tend to move together and developments anywhere in the oil market can affect oil prices everywhere. Despite developments in the United States, global oil consumption is at an all time high. It is expected to continue growing for the foreseeable future, led by demand from emerging market countries. In light of this demand growth, there are concerns about the adequacy of global supply. These concerns about supply and demand are borne out of recent experience (see Figure 5 ). Oil prices have generally increased since 2002. Rapid, energy-intensive economic growth in emerging market countries has meant they have been leading global oil demand growth. Global oil supply was unable to keep up with demand at previously prevailing prices. Depletion of some easy-to-produce resources, the oil industry's difficult shift to more complex resources, geopolitical and weather-related supply disruptions, and restrictions on oil production in resource rich countries all hampered supply growth. Oil prices rose to balance the market, pricing out some consumers and incentivizing additional supply. Prices collapsed with the global economic downturn in 2008, but the respite was temporary. Prices recovered as economic growth returned, particularly in emerging markets, and new geopolitical developments again raised concerns about global supply. The unrest in Egypt, Libya, and other parts of the Middle East and North Africa contributed to higher oil prices in 2011, as have tensions with Iran in 2012. Supply disruptions or risk of supply disruptions to particular sources of oil production (and transportation) can raise oil costs even to countries that do not import oil from these sources. The United States imported little oil from Libya prior to unrest there in 2011 and imports no oil from Iran, though disruptions or risk of disruptions related to those countries contributed to higher oil prices in the United States. Those who do purchase oil from these sources have to find alternative sources when their supply is disrupted. These customers can bid up the cost of oil from elsewhere, contributing to higher global oil prices. Crude oil prices translate quickly into the prices for petroleum products. The primary determinant of gasoline price changes is the price of crude oil. According to EIA, the cost of crude oil made up about 76% of the cost of gasoline in December 2011. As illustrated in Figure 6 , gasoline prices generally track the price of crude oil. Crude oil prices had been increasing from late 2011, particularly from November 2011 through March 2012. Gasoline price increases followed shortly thereafter. For background on what drives crude oil prices, see CRS Report R42024, Oil Price Fluctuations , by [author name scrubbed] and [author name scrubbed]. For more on 2012 increases in crude oil and petroleum product prices, see CRS Report R42382, Rising Gasoline Prices 2012 , by [author name scrubbed] and [author name scrubbed]. Oil import and export developments pose a host of policy issues, some of which are considered below. Concerns about import dependence continue to generate interest in policy options to directly discourage imports or to reduce the need for imports by increasing domestic supply and decreasing demand. Rising exports at a time of rising prices have led to calls to restrict such trade. The debate around the Keystone XL pipeline involves concerns about both imports and exports. Also discussed is the Strategic Petroleum Reserve, created to provide a short term policy option in case of supply disruptions at home or abroad. Shortly after the United States became a net oil importer, President Truman appointed the Paley Commission to examine the security of supply for oil and other basic materials. It supported policies for greater domestic production, particularly from oil shale, and efficiency, but also advised against raising trade barriers to imports. Imports continued to rise despite persistent concerns around import dependency. Under powers granted in the Trade Agreements Extension Act of 1958, President Eisenhower imposed quotas that limited imports east of the Rockies to a certain percentage of total consumption. The quota program broke down by 1969 due to rising oil prices and quota loopholes. President Nixon replaced the program with an import fee in 1974, set at only a few cents per barrel. Current tariffs on oil imports range from 5.25¢ to 52.5¢ per barrel depending on the type of petroleum. See various rates in the Appendix . Oil and petroleum products from certain countries are subject to duty-free treatment under several trade agreements and preferential trade programs enacted by Congress. The North American Free Trade Agreement (NAFTA), the Generalized System of Trade Preferences (GSP), and the African Growth and Opportunities Act (AGOA) account for most of the foregone revenue from waived tariffs. At 2010 import levels, these and other waiver programs accounted for about $180 million dollars in foregone revenue, down from $215 million in 2005 when import volumes were higher. In the past, an increase in the tariff on oil has been considered a means to provide an advantage to domestic oil producers and reduce imports. Because tariffs on refined oil products are already at the highest levels permitted by U.S. agreements with the World Trade Organization (WTO), any increase may be limited to crude oil tariffs. The United States has not made any tariff commitments to the WTO binding duties on crude oil. But like crude oil, refined products are globally traded. There is a risk that an increase in the tariff on crude oil alone may create a disadvantage for domestic refiners vis-à-vis their foreign competition by raising the cost of crude they use. This could encourage more imports in the form of refined products instead of crude oil or discourage refined product exports—in either case potentially reducing refining capacity utilization at home. The Obama Administration has targeted reducing oil imports by one-third over the next decade through encouraging greater conventional crude oil production, increased production of biofuels, efficiency improvements, and alternative fuel vehicles. Members of Congress have introduced a range of proposals aimed at increasing domestic liquid fuels supply or reducing liquid fuels demand. These include creation of new policies or programs, or the removal of existing policy barriers to supply enhancing (or demand dampening) investment. Both sets of options come with associated costs and benefits to be weighed. This section briefly discusses several examples. Larger components of recent domestic supply growth have come from onshore crude oil and natural gas liquids production (see Table 1 ). This has been driven in large part by greater production from tight oil and shale gas formations (shale gas formations can contain natural gas liquids, which are part of the oil market). Higher oil prices and advances in horizontal drilling and hydraulic fracturing technologies made these resources commercial. According to the International Energy Agency (IEA), U.S. tight oil production averaged 620,000 b/d in 2011, may grow to 870,000 b/d in 2012, and could reach 1.7 Mb/d by 2016. About two-thirds of U.S. tight oil output in 2011 came from the Bakken and Three Forks deposits in North Dakota (see Figure 7 ). For context, the United States produced about 5.6 Mb/d of crude oil in 2011. Texas's Eagle Ford shale is another major source of tight oil production. There is also tight oil development in California and the Rockies. While particular forecasts differ, analysts generally expect significant growth in U.S. tight oil production going forward. However, there are environmental concerns around the processes used to extract these resources, including the impact on water resources and air quality. State and federal government officials as well as industry are looking into how best to address these risks. For more, see CRS Report R42032, The Bakken Formation: An Emerging Unconventional Oil Resource , by [author name scrubbed] et al. The tradeoffs surrounding offshore oil and gas development have been debated in recent years. Rising activity in progressively deeper and riskier waters, coupled with alleged industry and government complacency on safety, created environmental and worker safety risks that were realized with the Deepwater Horizon oil spill. Risks to worker safety and the environment may be reduced with improved regulatory enforcement, new regulatory measures, or perhaps industry led preventative measures, though risks are not likely to be eliminated. As with tight oil development, state, federal, and industry officials are looking to incorporate practices which can mitigate these risks. For more, see CRS Report R42371, Deepwater Horizon Oil Spill: Highlighted Activities , by [author name scrubbed]. Production and use of ethanol as a motor fuel is another example of policy tradeoffs. Fuel ethanol production has increased by roughly 0.7 Mb/d since 2005, when the Renewable Fuel Standard and ethanol excise tax credit were passed, and use of the alternative additive, Methyl tertiary butyl ether (MTBE), was phased out. But some critics argue that increased use of corn for biofuels has contributed to higher food prices. Others cite the high cost to taxpayers in the form of forgone revenues. The ethanol tax credit reduced federal excise tax revenue by roughly $6 billion in 2009; it cost taxpayers $1.78 for each gallon of gasoline consumption displaced by corn-based ethanol according to Congressional Budget Office estimates. Further, there are limits to how much fuel ethanol can be absorbed by the U.S. market. On December 31, 2011, most biofuels blending and production tax credits expired, with the exception of the cellulosic biofuels production tax credit, which is currently set to expire at the end of 2012. For more, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues , by [author name scrubbed]. There are also proposals to use coal and natural gas for transportation as a substitute for oil. The United States is largely self-sufficient in these hydrocarbons due at least in part to large reserves of coal and growing natural gas resources. Many technologies that convert coal and natural gas to liquid fuels or otherwise make it possible to use them in transportation tend to be expensive and require large investments in processing facilities, infrastructure, and/or investment in vehicles. To the extent this is resolved with federal support, there is a fiscal trade-off. Further, there are concerns that coal-to-liquids technology emits significant amounts of greenhouse gases. Natural gas technology options also emit greenhouse gases though less so than coal. Growing natural gas supplies and low domestic natural gas prices have made these technologies more attractive. However, there are competing uses for natural gas, including use in power generation, domestic industry, and interest by some in exporting it overseas as liquefied natural gas (LNG) to countries with higher natural gas prices. LNG exports have to be approved by the Department of Energy. As of February 28, 2011, the Department of Energy had received 10 applications for LNG facilities with a collective export capacity of 13.8 billion cubic feet per day, equivalent to about 22% of 2011 U.S. dry gas production. For more on alternative fuels, including biofuels, natural gas vehicles, and electric vehicles, see CRS Report R40168, Alternative Fuels and Advanced Technology Vehicles: Issues in Congress , by [author name scrubbed]. There are also demand-side examples of policy trade-offs. Congress increased the Corporate Average Fuel Economy standard (CAFE) in 2007, its first increase for cars in two decades. Proposed regulations under CAFE standards would gradually raise the average fuel economy of new passenger cars and light trucks each year to reach a combined 49.6 miles per gallon (mpg) by 2025. This has played an important role in expectations for lower oil imports over the next several decades, but effects of higher CAFE standards can take years to manifest because it takes years to turn over the vehicle fleet. To spur growth in the auto industry and accelerate vehicle efficiency, Congress passed the Consumer Assistance to Recycle and Save Act of 2009 (CARS, also known as "Cash-for-Clunkers") which provided a $3,500 or $4,500 rebate for trading in a used car for a more fuel efficient vehicle (the amount depended on the fuel economy improvement). According to the Council on Economic Advisors, the CARS program provided a temporary stimulus that contributed to economic recovery from recession, created jobs, and likely reduced some fuel consumption faster than CAFE. But there were trade-offs: Accelerating fuel efficiency through CARS may have cost the government significantly more than the estimated future fuel savings for participating consumers. It may only reduce 2020 oil consumption and greenhouse gas emissions by an estimated 0.02%. It accelerated some sales that would have taken place in future months anyway. And by scrapping cars traded in, it may have increased the cost of vehicles for those who purchase used cars in the future. Crude oil exports are generally prohibited by statute. The Energy Policy and Conservation Act of 1975 ( P.L. 94-163 , EPCA) directs the President to restrict the export of crude oil. There are also additional restrictions on export of crude oil transported on pipelines that received federal right of ways, produced on the outer continental shelf, or produced from the Naval Petroleum Reserve. There are certain cases where crude oil exports are permitted in statute: If it is shipped on the Trans-Alaska Pipeline, of foreign origin, or is from the Strategic Petroleum Reserve if such export will directly result in import of refined products not otherwise available. The Department of Commerce's Bureau of Industry and Security (BIS), which regulates crude oil exports under its Short Supply Controls, will grant export licenses for crude oil that fall into these categories above. They would otherwise not be granted. While infrequent, there are instances where crude of foreign origin is shipped into the United States and then re-exported. If the crude is of foreign origin and has not been co-mingled with crude of U.S. origin, it may be permitted for export. EPCA and other statutes allow the President to permit crude oil export in circumstances where the President determines that such exports are in the national interest. The President made such determinations for limited export of heavy crude oil from California in 1992, crude oil produced from Alaska's Cook Inlet in 1985, and oil exports to Canada for use or consumption therein in 1985 and 1988. In 1995, Congress passed P.L. 104-58 which amended the Mineral Leasing Act to permit exports of oil carried on the Trans-Alaska pipeline unless the President determined that these exports are not in the national interest. It directed the President to make such a determination within five months of the bill's passage. The President issued a determination that such exports were in the national interest. Small amounts of crude oil were exported from Alaska until 2000, when changing commercial factors made exports uneconomic. Export of refined petroleum products are generally permitted and do not require a license from BIS. EPCA does not require the President to restrict refined products exports the way it does crude oil, though it does grant the President the authority to restrict exports of coal, petroleum products, natural gas, or petrochemical feedstock "by rule, under such terms and conditions as he determines to be appropriate and necessary to carry out the purposes of this Act." This authority has never been utilized. In recent months, policy makers have expressed interest in restricting petroleum product exports as their export volumes have risen and petroleum product prices have also gone up. U.S. international trade commitments may limit the ability to prohibit exports if an export prohibition cannot be justified under an available trade agreement exception. The General Agreement on Tariffs and Trade (GATT), to which the United States is a signatory, prohibits WTO members from maintaining quantitative prohibitions or restrictions, such as quotas, on the exportation of any product to another WTO member country. (While issues differ, it may be worth noting that the United States recently requested consultations with China under the WTO Dispute Settlement Understanding over Chinese export restrictions on rare earth elements, which are used in energy and other applications, and successfully challenged China in the WTO over its export restrictions on a variety of raw materials. ) There is an exception to the GATT prohibition on export restrictions for temporary measures to prevent critical shortages of foodstuffs or other essential products. The GATT also contains general exceptions including those for measures relating to the conservation of exhaustible natural resources if imposed in conjunction with limits on domestic production or consumption, export restrictions posed in conjunction with price stabilization plans, and restrictions for reasons of short supply. Separately, Article 605 of the North American Free Trade Agreement (NAFTA) places additional restrictions on the ability of the United States to limit exports of energy and basic petrochemical goods to Canada and vice versa (Mexico is not party to Article 605). Both GATT and NAFTA contain national security exceptions, though NAFTA limits the scope of the exceptions for the United States and Canada in energy trade (see NAFTA, Article 607). To what degree prohibiting petroleum product exports would reduce prices is unclear. Some contend that there may be a decline in the price of gasoline and other refined products if their export were restricted. Others suggest there will be no decline in gasoline prices if such measures were adopted. Export proponents point out that the import of relatively less expensive crude oil and the export of relatively more expensive refined products can support economic growth. Without the option to export, refiners that had been exporting petroleum products may either find a way to sell additional volumes within the United States or operate their refineries at lower levels of capacity utilization. The former option requires refiners to discount products and accept lower margins to sell products into the domestic market. (Presumably they are currently able to sell products at higher prices abroad than the lower prices that would be necessary to market more products domestically). The degree to which this can take place is limited by the latter—if refiners cannot buy crude, process it, and sell products at a profit, they will curtail operations. Oil consumption is relatively "inelastic" (unresponsive) to price and more responsive to income and economic growth: It may take large discounts in price to sell additional volumes, especially into a weak economy. Some may argue that sufficient discounts may be uneconomic for export-restricted refiners to carry out, and that such refiners would instead curtail production. While how this may play out is uncertain, what is clear is that any impact on product prices would be bounded by the price of crude oil, which is the main driver of higher gasoline, diesel, and other refined product prices. As with international trade concerns in other goods and services, concerns about petroleum products exports can be thought of as a distributional issue. It is likely a benefit to the economy if existing refining capacity can be utilized in a way which contributes to export earnings. Rising petroleum product exports shown in Table 7 helped mitigate the increase in the net oil import bill. On average, petroleum products are likely to have higher prices than the crude from which they are refined. That economic benefit may accrue to refiners to the degree they have invested in refining capacity and have beneficial access to crude supplies and export markets. Consumers may face higher costs when foreign markets are willing to pay more for refined products. However, the benefit to consumers from prohibiting exports may be limited—the price of gasoline and other refined products is largely driven by crude oil prices. And restricting U.S. exports may mean that foreign markets which would be served by U.S. refiners are instead served by foreign refining capacity and U.S. refiners curtail utilization of existing capacity. Instead of prohibiting exports, some have suggested a federal tax, tariff, or duty on exports. However, these are generally prohibited by Article 1, Section 9, clause 5 of the U.S. Constitution, which states that "No Tax or Duty shall be laid on articles exported from any State." Both proponents and opponents of the proposed Keystone XL pipeline have cited the impact on U.S. oil trade among their arguments. Proponents argue that Keystone XL would facilitate greater production from Canada's oil sands and import of that supply by the United States, where it could substitute for oil from less reliable sources. Some also contend that, absent such a pipeline into the United States, oil sands production may grow more slowly than might otherwise be the case and/or that infrastructure may be built that would allow rising oil sands output to go to Asia in addition to the United States. Opposition to the pipeline stems from concerns about environmental impacts, but opponents also question the economic and energy security benefits of the project. Among the trade-related issues argued by the pipeline's opponents is the contention that crude oil from the pipeline may be exported to other countries rather than remain in the United States. Alternatively, others have suggested that the crude oil may be refined in the United States and the products exported. They also contend that Keystone XL will not insulate the United States from price fluctuations that raise import costs. It appears possible that Canadian crude oil traveling through the United States via a pipeline such as Keystone XL may receive a license to be exported from the United States. As discussed above, EPCA allows for export of foreign origin crude. The Mineral Leasing Act's restriction on export of crude traveling through pipelines that receive federal rights of way applies to domestically produced crude. However, given the U.S. Gulf Coast's large concentration of sophisticated refining capacity and large need for foreign crude, it may be more economic to refine Canadian crude from the oil sands in the United States. Most of the crude imported from the oil sands today and most of the growth in oil sands production is expected to be in the form of a heavy sour crude which requires sophisticated refining capacity to be processed in large quantities. Heavy sour crude from Canada's oil sands will presumably compete with foreign seaborne heavy sour crudes, which could be diverted elsewhere. Foreign seaborne sources of U.S. heavy sour crude imports include Brazil, Colombia, Ecuador, Kuwait, Mexico, Peru, Russia, the United Kingdom, and Venezuela. According to a report commissioned by the Department of Energy, if pipeline capacity from the oil sands to the United States is not built and if Canada expands pipeline capacity to its west coast, this may result in growing oil sands output being shipped to Asia and leave the United States importing correspondingly more oil from the Middle East and Africa. It is not certain if projects expanding pipeline capacity to Canada's West Coast will be carried out. They face opposition from environmental and First Nations groups, though the Canadian federal government has announced plans to streamline the environmental review process for such projects. A separate issue is if the Canadian crude will be refined into petroleum products that may then be exported. It is possible that some of the petroleum products refined from crude oil carried on the Keystone XL pipeline may be exported. There is no existing policy that would restrict these exports. Petroleum product exports have been commercially attractive in recent years, as described above. U.S. petroleum product exports have come predominately from the Gulf Coast region to which Keystone XL would carry crude oil. It is difficult to predict to what degree this may occur. Legislation that would prohibit export of petroleum products refined from oil that travels through Keystone XL has been introduced. Implementation of such measures may be complicated by how refineries can process multiple crudes. There may also be a conflict with U.S. commitments under international trade agreements (see " Export Restrictions on Crude Oil and Petroleum Products "). Even if some portion of Canadian crude carried on Keystone XL is refined and exported, it may still displace foreign imports from elsewhere if, in the absence of Keystone XL, refiners would have imported crude from elsewhere for refining and export. Keystone XL will not insulate the United States from global oil price fluctuations. However, if it facilitates greater global oil supply, it may contribute to global oil prices being lower than they might otherwise be. The proposed pipeline would connect oil sands production and tight oil production in North Dakota to the Midwest oil hub of Cushing, OK, and to refineries in the Gulf Coast. This addresses three current or potential future transportation bottlenecks: between the oil sands and United States, between growing oil supplies in North Dakota and other markets, and between the Midwest and the Gulf Coast. Regarding the first, according to some estimates there is currently sufficient pipeline capacity between Canada and the United States to handle growing imports until around 2019. The transport issues regarding growing North Dakota production are currently a concern but fall beyond the scope of this report. The third bottleneck is currently an issue for oil sands and U.S. Midwestern crude oil producers. Rising production from these sources and the limited southbound crude pipeline capacity has resulted in a glut of crudes in the Midwest market. This has benefited Midwestern refiners who can purchase discounted crude but can charge Midwestern consumers petroleum product prices in line with the national average. This bottleneck between the Midwest and Gulf Coast is expected to be alleviated in part by the reversal of the Seaway pipeline, which runs between Oklahoma and the Texas coast (expected this summer), so that it will run from north to south. It may further be addressed by TransCanada's plans to build the southernmost leg of the originally proposed Keystone XL pipeline, now referred to as the Gulf Coast Pipeline Project, which would run a similar route to Seaway. Reaching a larger market for crude oil, beyond the Midwest, with a larger amount of sophisticated refining capacity (such as the Gulf Coast), may reduce the discount oil sands crudes currently face in the Midwest. Even if there is currently available pipeline capacity into the United States, oil sands (and pipeline) projects take years to plan and build, and investment decisions may be based at least in part on expected transport options. If greater certainty about transport options results in greater investment and more rapid development in the oil sands, it could raise global oil supply and contribute to oil prices being lower than might otherwise be the case. At maximum capacity, Keystone XL could carry about 0.8 Mb/d, which is about 1% of today's roughly 89 Mb/d global oil market. This would represent a 20% increase in the existing pipeline capacity carrying oil from Canada to the United States. It is unclear to what degree this additional pipeline transport capacity could facilitate faster or greater production growth from the oil sands, and to what extent that will contribute to lower global prices. Some may argue that the increment would be too small to make a substantial difference in oil prices given the size of the global oil market. However, it may be worth noting that most individual energy production and infrastructure projects—whether they involve conventional, unconventional, alternative, or renewable energy—when measured in isolation will look small relative to the global oil market. Global crude oil prices will still experience fluctuations. However, when oil prices rise, it may be less economically harmful to the United States if more of the resulting wealth transfer from oil importers to oil exporters went to countries that are major trade partners and may be more likely to spend growing wealth on U.S. goods and services. Benefits of increased oil supply from Canadian oil sands may be weighed against environmental costs. Of particular concern to some have been the greenhouse gas (GHG) emissions that may result from greater production, import, and use of oil sands crudes. A number of studies have found that the GHG emissions of oil sands crudes may be higher than for the average crude oil used in the United States. Results between studies vary due to differences in data, methodology, and how they are specified. Many studies are "Well-to-Wheels" (WTW) life-cycle assessments (LCAs), which include emissions of carbon and other GHG emissions from crude extraction, transportation, refining, distribution of refined product to retail markets, and the combustion of the fuel by end users (e.g., in vehicles or factories). Other studies focus on only part of the supply chain, for instance studies that are "Well-to-Tank" or "Well-to-Refinery Gate." Final combustion can represent 70%-80% of WTW emissions of any crude, so its exclusion in an LCA can make a significant difference on how much more GHG intensive oil sands crudes appear in a study's results. Beyond just stages, what inputs into fuel production should be included in a full LCA, as well as the values and weights of those inputs is a matter of ongoing debate. While GHG emissions and other air quality issues originating in the upstream (extraction) sectors of Canada's petroleum industry do not directly impact U.S. National Emissions Inventories or U.S. GHG reporting per se, many environmental stakeholders and policymakers have noted that increased use of more GHG-intensive resources in the United States may have negative consequences for both U.S. and global energy policy and environmental practices as the location of GHG emissions is far less relevant than the total global emissions. The U.S. Department of State, in response to comments on the draft Environmental Impact Statement (EIS) for the Keystone XL pipeline project, investigated the GHG life-cycle emissions associated with these resources in comparison to other reference crudes. The Department of State presented this analysis in the Final EIS as a "matter of policy," but noted that an EIS was not required to include an assessment of environmental activities outside the United States. Further, it stated that while the proposed Keystone XL pipeline project may contribute to certain continental scale environmental impacts, it may not substantially influence either the rate or magnitude of oil extraction activities in Canada or the overall volume of crude oil transported to and refined in the United States. The Final EIS concluded that, despite differences in study designs and input assumptions, the crudes that would likely be transported on the proposed Keystone XL pipeline, are on average "somewhat more GHG-intensive than the crudes they would displace in the U.S. refineries." The findings of a 2009 National Energy Technology Laboratory (NETL) study, which estimates the WTW GHG emissions of producing gasoline from various crudes, is presented in Figure 8 . According to the NETL study, producing and consuming gasoline from a weighted average of Canadian oil sands crudes imported into the United States yields about 17% more GHG gasoline derived from the average mix of crudes used in the United States in 2005 ("baseline"). However, it is comparable to gasoline derived from U.S. imports of some Venezuelan and Nigerian crudes. Across the various published studies analyzed by the Department of State, fuel produced from oil sands crudes was found to be 9% to 19% more GHG-intensive than fuel from Middle Eastern heavy sour crude, 5% to 13% than fuel from Mexican Maya crude, and 2% to 6% than fuel from Venezuelan Bachaquero crude on a Well-to-Wheels basis. In the wake of the Arab Oil Embargo in 1973-1974, Congress created Strategic Petroleum Reserve (SPR), a stockpile of crude oil to mitigate the impact of future supply disruptions. The SPR currently holds 696 million barrels of oil, 96% of its total storage capacity, in five salt dome caverns located in Texas and Louisiana. This is equivalent to 83 days' worth of U.S. net oil imports. At its maximum rate, the SPR can be draw down at 4.25 Mb/d for 90 days; the rate diminishes thereafter. The President has the authority to release oil from the SPR in the event of "severe energy supply interruptions." Also in response to the Arab Oil Embargo, the United States joined with other advanced economies to form the International Energy Agency (IEA). IEA members have pledged to hold oil stocks equivalent to 90 days' worth of net oil imports (includes government held and commercial stocks). As of January 2012, IEA members held more than 4 billion barrels of oil stocks, of which 1.5 billion were government controlled. IEA government held stocks could be brought to market at a maximum rate of 14.4 Mb/d in the first month of an IEA collective action. The United States has drawn down the SPR for emergency reasons in three cases of global supply disruptions, each in coordination with other IEA countries: Iraq's invasion of Kuwait and the subsequent Gulf War (1990/91), Hurricanes Katrina and Rita in the U.S. Gulf Coast (2005), and after prolonged disruption of Libyan exports (2011). These events reduced global oil supply. As described above, that can affect oil prices around the world, including the cost of U.S. domestic oil and oil imports, even if these imports do not come from the disrupted sources. These releases of strategic stockpiles can help offset the impact of disruptions and may have contributed to oil prices being lower than they might have otherwise been. The SPR provides a short term tool to respond to sudden supply disruptions at home or abroad. In 2012, the potential loss of Iranian exports to the market is not a physical disruption quite like the historic examples mentioned above. Nonetheless, tightening U.S. and EU sanctions policy appears to be having a similar effect by making Iranian crude more difficult to sell and potentially keeping some of it off the market. Correspondingly, former purchasers of Iranian crude oil are looking for supply elsewhere, potentially bidding up global oil prices, including those faced by U.S. consumers. Further, there are currently disruptions reducing supply from elsewhere, including Sudan, Syria, and Yemen. This has prompted some to argue for a release of the SPR to contribute to lower oil prices and reduce the burden of import costs on the U.S. economy. Foreign disruptions for which an SPR drawdown may be considered include disruptions to sources of U.S. imports or disruptions of sources the United States does not directly import from but which can affect the availability of global oil supply (and prices) as was largely the case in the release of crude in the Summer of 2011. But what constitutes a significant enough supply disruption is debated. On the one hand, releasing crude oil from the SPR leaves less oil to use in case there are future disruptions and leaves open the risk that the SPR may have to be refilled at higher prices in the future. Being too cautious about the use of the SPR, on the other hand, may mean its full value is never utilized. Further, market participants, including oil exporting countries, may discount the possibility that the United States would use this policy tool in the future. SPR issues are considered in greater detail in CRS Report R41687, The Strategic Petroleum Reserve and Refined Product Reserves: Authorization and Drawdown Policy , by [author name scrubbed] and [author name scrubbed].

Summary: Over the last six years, net oil imports have fallen by 33% to average 8.4 million barrels per day (Mb/d) in 2011. This represents 45% of domestic consumption, down from 60% in 2005. Oil is a critical resource for the U.S. economy, but despite policy makers' long-standing concern, U.S. oil imports had generally increased for decades until peaking in 2005. Since then, the economic downturn and higher oil prices were a drag on oil consumption, while price-driven private investment and policy helped increase domestic supply of oil and oil alternatives. Net imports are gross imports minus exports. The decline in net imports has manifested itself as a decrease in gross imports and an increase in exports of petroleum products. Gross U.S. imports of crude oil and petroleum products averaged 11.4 Mb/d in 2011, down 17% since 2005. More than a third of gross imports came from Canada and Mexico in 2011. About 40% came from members of the Organization for the Petroleum Exporting Countries (OPEC), mostly from OPEC members outside the Persian Gulf. Regionally, the largest share of U.S. imports come into the Gulf Coast region, which holds about half of U.S. refining capacity and sends petroleum products to other parts of the country and abroad. All regions of the country import more crude than refined products except for the East Coast, where petroleum products imports may rise further due to refinery closures. U.S. oil exports, made up almost entirely of petroleum products, averaged 2.9 Mb/d in 2011. This is up from export of 1.2 Mb/d in 2005, led by growing export of distillates (diesel and related fuels) and gasoline. More than 60% of U.S. exports went to countries in the Western Hemisphere, particularly to countries such as Mexico and Canada from which the U.S. imports crude oil. Exports occur largely as a result of commercial decisions by oil market participants which reflect current oil market conditions as well as past investment in refining. As a result, net oil imports fell from a peak of 12.5 Mb/d in 2005 to 8.4 Mb/d in 2011, their lowest level since 1995. A consensus is generally emerging among energy analysts that U.S. oil imports may be past their peak, reached in 2005. Imports as a share of consumption are expected to fall further, to less than 40% after 2020 driven by tighter fuel economy standards and increased domestic supply. Despite the decline in net import volumes, the cost of net imports has increased due to rising oil prices. The aggregate national cost of oil imports is a function of the volume of oil imported and the price of that oil. The United States spent about $327 billion on net oil imports in 2011. Being a net importer of a particular good is not necessarily negative for an economy, but greater national oil import dependence can amplify the negative economic impacts of oil price increases. Oil import and export developments pose a host of policy issues. Concerns about import dependence continue to generate interest in policy options to directly discourage imports or to reduce the need for imports by increasing domestic supply and decreasing demand. Rising exports at a time of rising prices has led to calls for policies to restrict such trade. The debate around the Keystone XL pipeline involves concerns about imports, exports, and the environment. The rising cost for fuels has led to calls for release of the Strategic Petroleum Reserve, meant to provide a short term policy option in case of supply disruptions. Policy options may entail various economic, fiscal, and environmental trade-offs.