The US is highly dependent on crude oil to produce fuels for transportation. The figure below shows how the transportation sector is almost all oil-based, and the other sources barely make a dent in the hold petroleum has. Up until the last few years, the US has been highly dependent on foreign sources of oil. In 2023, petroleum accounted for approximately 89% of the primary energy consumption in the transportation sector, but it contributed less than 1% to the primary energy consumption in the electric power sector. The chart below illustrates the various types and quantities of primary energy sources used in the United States, the primary energy consumption by the electric power sector and end-use sectors, and the sales of electricity from the electric power sector to these end-use sectors. Growth across different parts of the global energy system varied widely in 2024, shaped by both short-term influences and longer-term structural shifts. Worldwide energy demand rose by 2.2%—well above the 1.3% annual average recorded from 2013 to 2023. Around 0.3 percentage points of this increase can be attributed to the effects of extreme weather. Even so, energy use expanded at a slower pace than the global economy, which grew by 3.2% in 2024, roughly in line with its long-term trend. Electricity demand grew faster than both overall energy use and GDP in 2024, rising by 4.3%. In absolute terms, this was the largest increase ever observed outside of post-recession rebounds. The surge was driven by structural factors, including wider use of electricity-intensive appliances such as air conditioning, shifts toward electricity-heavy manufacturing, growing needs from digitalisation, data centres, and AI, and the continued electrification of end uses. Altogether, the power sector accounted for around 60% of the global increase in energy demand.
On the supply side, renewables contributed the largest share of growth (38%), followed by natural gas (28%), coal (15%), oil (11%), and nuclear (8%). However, energy intensity improved by only 1%, extending the recent trend of slower efficiency gains. Energy-related CO₂ emissions rose by 0.8%—a deceleration compared with the 1.2% increase in 2023. (IEA, 2025).”
The US was the world's largest petroleum consumer (EIA, 2012), but was third in crude oil production. Over half of the material that was imported into the US comes from the Western hemisphere (North, South, and Central America, and the Caribbean), but we also imported 29% from Persian Gulf countries (Bahrain, Iraq, Kuwait, Saudi Arabia, and the United Arab Emirates).
The top 5 sources of net crude oil and petroleum imports included 1) Canada, 28%, 2) Saudi Arabia, 13%, 3) Mexico, 10%, 4) Venezuela, 9%, and 5) Russia, 5%. According to CNN Money, the US was behind Russia and Saudi Arabia in oil production for the first three months of 2016. See the World's Top Oil Producers for additional information. However, this situation recently changed, and the US became the world's largest oil producer in 2018 for the first time since 1973 and held the lead position through 2022. U.S. oil refineries obtain crude oil produced in the United States and other countries. Based on EIA, crude oil is extracted in 32 U.S. states as well as in coastal waters. In 2022, five states together made up roughly 72% of the total crude oil production in the United States. In 2022, 98 countries collectively produced around 80.75 million barrels of crude oil, with five of these nations contributing approximately 52% of the global total. The top five crude oil-producing countries and their respective shares of world crude oil production in 2022 were: The United States 14.7%, Saudi Arabia 13.2%, Russia 12.7%, Canada 5.6%, and Iraq, 5.5%. See the following link for further information see America is now the world's largest oil producer.
The image is a detailed chart titled "U.S. Energy Consumption by Source and Sector, 2023", showing how energy from various sources is distributed across different sectors of the U.S. economy. The total energy supplied by sources is 93.6 quadrillion British thermal units (Btu), while the total energy consumed by end-use sectors is 74.7 quadrillion Btu. The difference accounts for energy losses, primarily in electricity generation and transmission.
The energy sources are broken down as follows: Natural Gas accounts for 36% (33.6 quadrillion Btu), Petroleum for 35.4% (33.1 quadrillion Btu), Renewable Energy for 8.2% (7.7 quadrillion Btu), Coal for 8.1% (7.6 quadrillion Btu), and Nuclear Electric Power for 8.1% (7.6 quadrillion Btu).
The end-use sectors are Transportation at 28%, Industrial at 26%, Residential at 11.3%, and Commercial at 9.3%. These percentages represent the share of total energy consumption by each sector.
The Electric Power Sector uses 32.1 quadrillion Btu of energy. Of this, 13.2 quadrillion Btu (41%) is delivered as electricity sales to ultimate consumers, while 18.9 quadrillion Btu (59%) is lost in the electrical system due to generation and transmission inefficiencies.
The chart visually connects each energy source to the sectors it supplies, illustrating the flow of energy through the U.S. economy. For example, petroleum is primarily used in transportation, while natural gas, coal, renewables, and nuclear are major inputs for electricity generation. The chart is based on data from the U.S. Energy Information Administration’s Monthly Energy Review and includes notes on data rounding and definitions of primary energy consumption.
So, while oil is fairly available currently, there is extensive potentially explosive turmoil in many petroleum-producing regions of the world, and, in several places, the US's relationship with some oil-producing countries is strained. China and India are now aggressive and voracious players in world petroleum markets because of high economic growth (as pointed out in the previous section). Saudi Arabia's production is likely "maxed out," and domestic oil production peaked in 1970. While the US dependence on imported oil has declined after peaking in 2005, it is clear that if any one of the large producers decides to withhold oil, it could cause a shortage of fuel in the US and would cause the prices to skyrocket from an already high price (depending on the type of crude oil, the price of oil is currently $100-$106/bbl) (see U.S. Energy Information Administration). The figure below is a graphic showing the price level of oil from 1950 to the present. As you can see, there has been significant volatility in the price of oil in the last ~50 years. One of the first spikes came in 1974 when the Organization of the Petroleum Exporting Countries (OPEC) became more organized and withheld selling oil to the US. It was a true crisis at that point, with gasoline shortages causing long lines and fights at gas stations, with people filling up only on certain days depending on their license plates. It had a high spike in 1980, but a significant low in 1986. When the price of oil hit a significant low in 1998, the government took steps to lower the tax burden on oil companies. But when the prices went back up, the law remained in place, and currently, oil companies do not have to pay taxes on produced oil. When the reduced tax burden went into place in the late 90s, it made sense, but oil companies have continued to convince Congress with lobbyists that it should stay that way. What do you think?
As seen in the figure below, there were major fluctuations in gasoline prices in the last few years. As we will discuss in a later lesson, several aspects contribute to the price of gasoline, including but not limited to the recent COVID-19 Pandemic. This is a graphic that shows the price volatility for gasoline from 1990 - 2024 (the most recent data available), and the other figure below shows a breakdown of what goes into the price of gasoline.
The image presents a side-by-side comparison of the cost breakdown for a gallon of Regular Gasoline and Diesel in June 2024, based on data from the U.S. Energy Information Administration's Gasoline and Diesel Fuel Update.
For Regular Gasoline, the average retail price is $3.46 per gallon. The cost components are distributed as follows: 55% of the price comes from the cost of crude oil, 12% from refining, 18% from distribution and marketing, and 15% from taxes.
For Diesel, the average retail price is $3.72 per gallon. The breakdown is slightly different: 51% of the cost is attributed to crude oil, 13% to refining, 20% to distribution and marketing, and 16% to taxes.
The chart visually compares these percentages using proportional segments, highlighting the differences in how each fuel type's price is structured. Diesel has a slightly higher retail price and a greater share of costs allocated to distribution, marketing, and taxes, while gasoline has a higher proportion of its cost coming from crude oil.
In recent years, petroleum became less available and more expensive, and replacement-alternative fuels emerged because the economics were beginning to become more favorable. However, due to lower demand and high petroleum supply, prices drastically dropped, which may affect the development of alternative fuels. There is one factor that will most likely reverse this trend, and that is that energy demands will continue to increase worldwide. For future transportation fuel needs, most likely a liquid fuel will be necessary, and no one source will be able to replace petroleum. In the International Energy Outlook 2021 (IEO2021) Reference case, it is anticipated that, without major policy or technological advancements, global energy consumption will rise by nearly 50% over the next 30 years. While petroleum and other liquid fuels are expected to remain the world's primary energy source by 2050, renewable energy sources like solar and wind are projected to expand to almost the same level. It is important to note that Petroleum and other liquids include biofuels.
Note: Petroleum and other liquids include biofuels.