U.S. energy production surpassed U.S. demand by a record amount last year, highlighting the need for growing exports.
The U.S. has been energy independent since 2019, when it exported more energy than it imported for the first time in decades. Importantly, production has continued to increase in the five years since the U.S. became a net energy exporter.
See more: Reflecting on US Energy Independence in 2024
Energy production in the U.S. increased 4% to nearly 103 quadrillion British thermal units (quads) in 2023, a record, according to the Energy Information Administration (EIA). Production exceeded consumption by 9 quads, more than at any other time since records began in 1949, according to the EIA.
Energy includes crude oil, natural gas, coal, petroleum products, and natural gas liquids (NGLs).
It’s important to note that while exports have surpassed imports, the U.S. will likely continue to import energy for years to come, according to VettaFi energy research analyst Philip Segal.
The Importance of Export Markets
Export markets are an important outlet for U.S. crude, according to VettaFi head of energy research Stacey Morris. The U.S. largely produces light, sweet crude. However, the complex refineries on the Gulf Coast and in the Midwest are generally geared to run lower quality heavy, sour crudes, according to Morris. U.S. refineries are typically already at capacity for domestic oil.
See more: Playing the Long Game: Offshore Crude Export Terminals
Exports of natural gas and natural gas liquids like propane have also seen growth. Liquefied natural gas (LNG) exports from the U.S. have ramped up in recent years, and export capacity is expected to increase 80% by 2028. Meanwhile, exports of NGLs like propane and ethane more than tripled between 2014 and 2023 and are expected to grow further.
See more: U.S. LNG Export Capacity to Rise 80% by 2028 and Midstream Investing in NGLs Amid Record Exports
How Midstream Companies Benefit from Growing Exports
Export growth will create opportunities for midstream MLPs and corporations. At a high level, more exports drive production growth. This creates more volumes for midstream, and more opportunities for midstream companies to make fees, according to Morris.
Midstream names transport hydrocarbons to the coast for export as well as own and operate export terminals, according to Morris.
ETFs offering exposure to midstream companies include the Alerian MLP ETF (AMLP ) and the Alerian Energy Infrastructure ETF (ENFR ).
AMLP’s underlying index is a capped, float-adjusted, cap-weighted composite of energy infrastructure MLPs. Included companies earn most of their cash flow from midstream activities.
ENFR’s underlying index is a composite of North American midstream energy infrastructure companies. The index includes MLPs (25%) and corporations (75%) engaged in the pipeline transportation, storage, and processing of energy commodities.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP and ENFR, for which it receives an index licensing fee. However, AMLP and ENFR are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of AMLP and ENFR.
