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U.S. Trade Deficit and the Impact of Changing
Oil Prices
James K. Jackson
Specialist in International Trade and Finance
July 14September 10, 2009
Congressional Research Service
7-5700
www.crs.gov
RS22204
CRS Report for Congress
Prepared for Members and Committees of Congress
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Summary
Petroleum prices rose sharply in the first half of 2008, at one time reaching more than $140 per
barrel of crude oil. Since July, however, petroleum prices and import volumes have fallen at a
historically rapid pace; in January 2009, prices of crude oil fell below $40 per barrel. At the same
time the average monthly volume of imports of energy-related petroleum products fell slightly.
The sharp rise in the cost of energy imports added an estimated $28 billion to the nation’s trade
deficit in 2007 and $120 billion in 2008. The fall in the cost of energy imports combined with the
drop in import volumes as a result of the slowdown in economic activity reversed the trend of
rising energy imports costs and sharply reduced the overall costs of U.S. energy imports for 2008
and for the first three months of 2009. This report provides two months of 2009. Beginning in March 2009, the import price of petroleum
products rose each month through July 2009, the most recent period for data. This report provides
an estimate of the initial impact of the
changing oil prices on the nation’s merchandise trade
deficit.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Contents
Background ................................................................................................................................15
Issues for Congress .....................................................................................................................6 10
Figures
Figure 1. Quantity of U.S. Imports of Energy-Related Petroleum Products ..................................37
Figure 2. Value of U.S. Imports of Energy-Related Petroleum Products .......................................37
Figure 3. U.S. Import Price of Crude Oil .....................................................................................59
Tables
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products, Including
Oil (not seasonally adjusted) ....................................................................................................26
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil (not
seasonally adjusted) .................................................................................................................48
Contacts
Author Contact Information ........................................................................................................7 11
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Background
According to data published by the Census Bureau of the Department of Commerce, 1 the prices
of petroleum products over the first half of 2008 rose sharply, generally rising considerably faster
than the change in demand for those products, before falling at a historic rate. After falling each
month since August 2008, average petroleum prices reversed course and rose by 30% between
February and May 2009 and reached over $70 per barrel in June 2009. As a result of changing
petroleum prices, the price changes in imported energy-related petroleum products worsened the
U.S. trade deficit in 2006, 2007, and 2008. Energy-related petroleum products is a term used by
the Census Bureau that includes crude oil, petroleum preparations, and liquefied propane and
butane gas. Crude oil comprises the largest share by far within this broad category of energyrelated imports. The slowdown in the rate of growth in the U.S. economy is sharply reducing the
reduced the amount of
energy the country imports and is helpinghelped to push down world energy prices. In
isolation from As economic growth
improves, energy imports will increase and energy prices are expected to rise. In isolation from
other events, lower energy prices tend to aid the U.S. economy, which makes it a
more attractive
destination for foreign investment. Such capital inflows place upward pressure on
the dollar
against a broad range of other currencies. To the extent that the additions to the
merchandise trade
deficit are returned to the U.S. economy as payment for additional U.S. exports
or to acquire such
assets as securities or U.S. businesses, the U.S. trade deficit could be mitigated
further.
further.
1
Census Bureau, Department of Commerce. Report FT900, U.S. International Trade in Goods and Services,
September 10, 2009. Table 17. The report and supporting tables are available at http://www.census.gov/foreign-trade/
Press-Release/current_press_release/ftdpress.pdf.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 1 presents summary data from the Census Bureau for the change in the volume, or quantity,
of energy-related petroleum imports and the change in the price, or the value, of those imports for
2008 and for 2009. The data indicate that during the first fiveseven months of 2009, the United States
imported 1,8242,571 million barrels of energy-related petroleum products, valued at $81127 billion.
Energy-related imports for this fiveseven-month period were down 4.75.6% in volume terms from the
same period in 2008 and cost slightly moreless than half the value of such imports during the same
period in 2008.
The data also indicate that the United States imported 4.6 billion barrels of total energy-related
petroleum products in 2008, valued at $439 billion, compared with a total value of $319 billion in
2007. In 2008, the quantity of energy-related petroleum imports fell by 4.0% compared with the
comparable period in 2007; crude oil imports also fell by 2.7% from the same period in 2007.
Year-over-year, the average value of energy-related petroleum products imports rose by 37.6%,
while the average value of crude oil imports rose by 44.2%. As Figure 1 shows, imports of
energy-related petroleum products can vary sharply on a monthly basis, but averaged about 384
million barrels a month in 2008.
1
Census Bureau, Department of Commerce. Report FT900, U.S. International Trade in Goods and Services, July 10,
2009. Table 17. The report and supporting tables are available at http://www.census.gov/foreign-trade/Press-Release/
current_press_release/ftdpress.pdf.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products,
Including Oil (not seasonally adjusted)
January through MayJuly
2008
2009
Quantity
(thousands of
barrels)
Value ($
thousands)
Quantity
(thousands of
barrels)
% change
2008 to
2009
Value ($
thousands)
% change
2008 to
2009
Total energyrelated
Petroleum
Products
1,914,723
$179,145,989
1,824,063
-4.7%
$81,115,394
-54.7%
Crude oil
1,486,179
$137,234,675
1,399,192
-5.9%
$60,973,398
-55.62,723,714
$277,471,812
2,571,244
-5.6%
$127,251,405
-54.1%
Crude oil
2,127,663
$215,032,955
1,975,891
-7.1%
$96,076,203
-55.3%
January through December
2008
2009
(Actual values)
(Estimated values)
Quantity
(thousands of
barrels)
Value ($
thousands)
Quantity
(thousands of
barrels)
% change
2008 to
2009
Value ($
thousands)
% change
2008 to
2009
Total energyrelated
Petroleum
products
4,613,626
$438,745,954
4,395,176
-4.7
$198,659,491
-54.7355,361
-5.6%
$201,213,373
-54.1%
Crude oil
3,591,136
$341,978,528
3,380,945
-5.9
$151,941,139
-55.6334,970
-7.1%
$152,795,177
-55.3%
Source: Census Bureau, Department of Commerce. Report FT900, U.S. International Trade in Goods and Services,
JulySeptember 10, 2009. Table 17.
Note: Estimates for January through December 2009 were developed by CRS from data through MayJuly 2009 and
data through 2008 published by the Census Bureau using a straight line extrapolation.
In value terms, energy-related imports rose from $319 billion in 2007 to $439 billion in 2008, or
an increase of 38%, to account for about 22% of the value of total U.S. merchandise imports. In
2008, the sharp rise experienced in energy prices in 2007 continued in January through July 2008
and did not follow previous trends of falling during the winter months. As Figure 2 shows, the
cost of U.S. imports of energy-related petroleum products rose from about $17 billion per month
in early 2007 to $53 billion a month in July 2008, but fell to $13.6 billion in February 2009,
reflecting a drop in the price and in the volume of imported oil. The average price of imported oil
in MayJuly 2009 was down 5250% from the average price in May 2008, and down 60% from the
average record high prices in July 2008, reflecting the sharp decrease in
the price of imported oil
in August 2008 through May,February 2009, as indicated in Table 2.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Figure 1. Quantity of U.S. Imports of Energy-Related Petroleum Products
Millions of barrels
450
440
430
420
410
400
390
380
370
360
350
340
330
May Jly S ep Nov Jan Mar May Jly S epSep Nov Jan Mar May Jly
Jun Aug Oct Dec Feb. Apr Jun Aug Oct Dec Feb Apr Jun
2007
2008
2009
Source: Department of Commerce
Figure 2.Value of U.S. Imports of Energy-Related Petroleum Products
Billions of dollars
$52
$48
$44
$40
$36
$32
$28
$24
$20
$16
$12
May Jly S ep Nov Jan Mar May Jly S ep Nov Jan Mar May Jly
Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun
2007
2009
2008
2007
2008
2009
Source: Department of Commerce
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Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil
(not seasonally adjusted)
Total energy-related
petroleum productsaproducts
Period
Quantity
(thousands of
of barrels)
Value
($
thousands)
Crude oil
Quantity
(thousands of
barrels)
Thousands
of barrels
per day
(average)
Value
($
thousands)
Unit price
(dollars)
2008
Jan.-Dec.
4,613,444
$438,686,820
3,590,628
9,810
$341,912,489
$95.22
Jan.-May
1,914,723
179,145,989
1,486,179
9,777
137,234,675
92.34July
2,723,714
277,471,812
2,127,663
9,9894
215,032,955
101.07
March
363,252
33,146,123
278,571
8,986
25,030,666
89.85
April
388,145
38,185,528
303,050
10,102
29,339,760
96.81
May
373,287
40,360,232
293,995
9,484
31,245,288
106.28
June
382,675
45,207,376
297,532
9,918
34,850,146
117.13
July
424,467
52,813,717
342,024
11,033
42,637,563
124.66
August
388,679
46,012,928
308,380
9,948
37,000,980
119.99
September
339,044
36,179,838
253,276
8,443
27,247,205
107.58
October
413,766
37,632,930
324,185
10,458
29,830,414
92.02
November
341,870
21,995,613
261,600
8,720
17,452,979
66.72
December
410,426
20,018,803
319,834
10,317
15,968,127
49.93
2009
Jan.-May
1,824,063
$81,115,394
1,399,192
9,266
$60,973,398
$43.58July
2,571,244
$127,251,405
1,975,891
9,320
$96,076,203
$48.62
January
404,658
16,342,408
300,137
9,682
11,949,605
39.81
February
335,912
13,618,145
254,874
9,103
9,996,300
39.22
March
377,470
16,047,403
289,693
9,345
11,983,004
41.36
April
367,943
17,403,719
292,601
9,753
13,633,848
46.60
May
338,081
17,703,718
261,888
8,448
13,410,641
51.21
June
369,963
22,415,123
280,424
9,347
16,592,370
59.17
July
377,218
23,720,887
296,274
9,557
18,510,434
62.48
Source: Census Bureau, Department of Commerce. Report FT900, U.S. International Transactions in Goods and
Services. JulySeptember 10, 2009. Table 17.
a.
CRS-4
Energy-related petroleum products is a term used by the Census Bureau and includes crude oil, petroleum
preparations, and liquefied propane and butane gas.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
As a result of the overall rise in the value of energy-related imports in 2008, the trade deficit in
energy-related imports amounted to $386 billion, or 47% of the total U.S. trade deficit of $821
billion for the year. In the fiveseven-month period of January-MayJuly 2009, the drop in oil prices, year
over year, combined with reduced demand for energy imports combined to pushpushed down the overall
value of
energy imports, which dropped to account for 3538% of the total merchandise trade deficit
over the five
seven-month period. This share is down from the same period in 2008, in which the trade
deficit deficit
in energy accounted for 4546% of the total U.S. merchandise trade devicit.
deficit.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Crude oil comprises the largest share of energy-related petroleum products imports. According to
Census Bureau data2, imports of crude oil fell from an average of 10.11 million barrels of crude
oil imports per day in 2007 to an average of 9.8 million barrels per day in 2008, or a decrease of
3%. In December 2008, such imports averaged 10.3 million barrels per day, or an increase of
7.4% over the volume of such imports recorded in December 2007. From June 2007 to June
2008, the average price of crude oil increased from $61 per barrel to $117 per barrel, or an
increase of 92%, as shown in Figure 3. As a result, the value of U.S. crude oil imports rose from
about $19 billion a month in June 2007 to $35 billion a month in June 2008.
Figure 3. U.S. Import Price of Crude Oil
Dollars per barrel
$125
$120
$115
$110
$105
$100
$95
$90
$85
$80
$75
$70
$65
$60
$55
$50
$45
$40
$35
May Jly SepS ep Nov Jan Mar May Jly SepS ep Nov Jan Mar May Jly
Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun
2007
2008
2009
Source: Department of Commerce
Data for 2008 indicate that a number of factors combined to push oil prices to record levels in
July 2008, before tumbling quickly. The sharp rise in oil prices combined with a small decrease in
the volumes of oil imports experienced during the period to post a large jump in the overall cost
2
Report FT900, U.S. International Trade in Goods and Services, July 10, 2009. Table 17.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
of imported energy. At times, crude oil traded for nearly $148 per barrel in July 2008, indicating
that the cost of energy imports would have a significant impact on the overall costs of U.S.
imports and on the value of the U.S. trade deficit. Since those record prices, the price per barrel of
imported crude oil fell to under $40 per barrel at times in January and February 2009. For the
year 2008, the imported volume of energy-related petroleum products fell by 4.0%, due in large
part to a slowdown in economic activity. At an average price of $95 per barrel, compared with an
average price of $64 per barrel in 2007, energy-related import prices added nearly $100 billion to
the trade deficit on an annual basis in 2008, pushing the annual trade deficit to just over $820
billion.
2
Report FT900, U.S. International Trade in Goods and Services, September 10, 2009. Table 17.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Issues for Congress
The sharp rise in prices of energy imports experienced since early 2007 through July 2008 was
expected to affect the U.S. rate of inflation and have a slightly negative impact on the rate of
economic growth in 2008. Various factors, dominated by the sharp slowdown in the rate of
economic growth in the United States and most other areas of the world, are combining to push
down the cost of energy imports. Typically, energy import prices have followed a cyclical pattern
that has caused energy prices to decline in the winter. A slowdown in the rate of economic growth
in the United states and elsewhere is reducing the demand for energy imports and caused oil
prices to tumble from the heights they reached in July 2008. An important factor that often affects
crude oil prices is the impact Atlantic hurricanes have on the production of crude oil in the Gulf
of Mexico The drop in oil prices likely will lessen the nation’s merchandise trade deficit, although
the most important factor affecting the trade deficit throughout 2009 will be the rate of growth in
the U.S. economy.
Over the long run, a return to a positive rate of economic growth likely will place upward
pressure on the prices of energy imports that will increase the nation’s merchandise trade deficit.
Some of this impact could be offset if some of the dollars are returned to the U.S. economy
through increased purchases of U.S. goods and services or through purchases of such other assets
as corporate securities or acquisitions of U.S. businesses. Some of the return in dollars likely will
come through sovereign wealth funds (SWFs), or funds controlled and managed by foreign
governments, as foreign exchange reserves boost the dollar holdings of such funds. Such
investments likely will add to concerns about the national security implications of foreign
acquisitions of U.S. firms, especially by foreign governments, and to concerns about the growing
share of outstanding U.S. Treasury securities that are owned by foreigners.
It is likely that the economy will again face high and rising prices for imported energy products as
national economies recover to a more robust rate of economic growth. It is possible for the
economy to adjust to the higher prices of energy imports by improving its energy efficiency,
finding alternative sources of energy, or searching out additional supplies of energy. There may
well be increased pressure applied to Congress to assist in this process. For Congress, the increase
in the nation’s merchandise trade deficit could add to existing inflationary pressures and
complicate efforts to stimulate the economy should the rate of economic growth slow down. In
particular, Congress, through its direct role in making economic policy and its oversight role over
the Federal Reserve, could face the dilemma of rising inflation, which generally is treated by
raising interest rates to tighten credit, and a slowing rate of economic growth, which is usually
addressed by lowering interest rates to stimulate investment. A sharp rise in the trade deficit may
also add to pressures for Congress to examine the causes of the deficit and to address the
underlying factors that are generating that deficit. In addition, the rise in prices of energy imports
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U.S. Trade Deficit and the Impact of Changing Oil Prices
could add to concerns about the nation’s reliance on foreign supplies for energy imports and add
impetus to examining the nation’s energy strategy.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Author Contact Information
James K. Jackson
Specialist in International Trade and Finance
jjackson@crs.loc.gov, 7-7751
Congressional Research Service
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