U.S. Trade Deficit and the Impact of Changing
Oil Prices
James K. Jackson
Specialist in International Trade and Finance
September 10November 13, 2009
Congressional Research Service
7-5700
www.crs.gov
RS22204
CRS Report for Congress
Prepared for Members and Committees of Congress
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 importsimport costs and sharply reduced the overall costs of U.S. energy imports for 2008
and for the first two months of 2009. Beginning in March 2009, the import price of petroleum
products rose each month through JulySeptember 2009, the most recent period for data. This report provides
provides an estimate of the initial impact of the changing oil prices on the nation’s merchandise trade
trade deficit.
Congressional Research Service
U.S. Trade Deficit and the Impact of Changing Oil Prices
Contents
Background ................................................................................................................................5
Issues for Congress ................................................................................................................... 10
Figures
Figure 1. Quantity of U.S. Imports of Energy-Related Petroleum Products ..................................7
Figure 2. Value of U.S. Imports of Energy-Related Petroleum Products .......................................7
Figure 3. U.S. Import Price of Crude Oil .....................................................................................9
Tables
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products, Including
Oil (not seasonally adjusted) ....................................................................................................6
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil (not
seasonally adjusted) .................................................................................................................8
Contacts
Author Contact Information ...................................................................................................... 11
Congressional Research Service
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 sincebetween August 2008 and February 2009, average petroleum prices reversed course and
rose by 3065% between
February and May 2009 and reached over $70 per barrel in June 2009. September 2009, climbing to nearly $80 per barrel at times.
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 energyrelatedenergy-related imports. The slowdown in the rate of growth in the U.S. economy
reduced the amount of
energy the country imports and helped to push down world energy prices.
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.
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
mitigated further.
Summary data from the Census Bureau for the change in the volume, or quantity,
of energy-related of energyrelated petroleum imports and the change in the price, or the value, of those imports for
2008 and for 2009
for 2009 are presented in Table 1. The data indicate that during the first sevennine months of 2009, the
United States
imported 2,5713,372 million barrels of energy-related petroleum products, valued at $127
$174 billion.
Energy-related imports for this sevennine-month period were down 5.62% in volume terms
from the
same period in 2008 and cost slightly less than half the value of such imports during the same
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 $319 billion in
2007. InAlso, in 2008, the quantity of energy-related petroleum imports fell by 4.0% compared with the
the comparable period in 2007; crude oil imports also fell by 2.7% from the same period in 2007.
Year-over-year, the average value of energy-related petroleum products imports rose by 37.6%,
while the average value of crude oil imports rose by 44.2%. As Figure 1 shows, imports of
energy-related petroleum products can vary sharply on a monthly basis, but averaged about 384
million barrels a month in 2008.
Congressional Research Service
6. In 2008, imports of
energy-related petroleum products averaged about 384 million barrels a month, but through the
first nine months of 2009, such imports have averaged 363 million barrels a month.
1
Census Bureau, Department of Commerce. Report FT900, U.S. International Trade in Goods and Services,
November 13, 2009. Table 17. The report and supporting tables are available at http://www.census.gov/foreign-trade/
Press-Release/current_press_release/ftdpress.pdf.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products,
Including Oil (not seasonally adjusted)
January through JulySeptember
2008
2009
Quantity
(thousands of
barrels)
Value ($
thousands)
Quantity
(thousands of
barrels)
% change
2008 to
2009
Value ($
thousands)
% change
2008 to
2009
Total energyrelated
Petroleum
Products
2,723,714
$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
-55.33,114,482
$323,698,054
2,909,784
-6.6%
$149,641,187
-53.8%
Crude oil
2,437,398
$252,155,488
2,244,319
-7.9%
$113,457,896
-55.0%
January through December
2008
2009
(Actual values)
(Estimated values)
Quantity
(thousands of
barrels)
Value ($
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
4,355,361
-5.6%
$201,213,373
-54.1310,397
-6.6%
$202,826,259
-53.8%
Crude oil
3,591,136
$341,978,528
3,334,970306,663
-7.1%
$152,795,177
-55.39%
$153,873,963
-55.0%
Source: Census Bureau, Department of Commerce. Report FT900, U.S. International Trade in Goods and Services,
September 10November 13, 2009. Table 17.
Note: Estimates for January through December 2009 were developed by CRS from data through July September
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 The
sharp rise experienced in energy prices in 2007 continued infrom January through July 2008
and 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 July in
September 2009 was down 5037% from the average price in July 2008, reflecting the sharp decrease in
in the price of imported oil in August 2008 through 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 SepS ep Nov Jan Mar May Jly
Jun Aug S ep
Oct Dec Feb. Apr Jun Aug Oct Dec Feb Apr Jun Aug
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
$12
May Jly S ep Nov Jan Mar May Jly S ep Nov Jan Mar May Jly
Jun Aug S ep
Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug
2007
2009
2008
Source: Department of Commerce
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil
(not seasonally adjusted)
Total energy-related
petroleum products
Period
Quantity
(thousands
of barrels)
Value
($
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.-July
2,723,714
277,471,812
2,127,663
9,9894
215,032,955
101.07Sept.
3,450,431
359,454,064
2,688,497
9,812
279,098,862
103.81
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.-July
2,571,244
$127,251,405
1,975,891
9,320
$96,076,203
$48.62Sept.
3,271,740
$174,513,474
2,530,537
9,269
$132,969,541
$52.55
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
August
338,539
22,389,783
268,429
8,659
17,381,693
64.75
September
361,956
24,872,287
286,217
9,541
19,511,645
68.17
Source: Census Bureau, Department of Commerce. Report FT900, U.S. International Transactions in Goods and
Services. September 10November 13, 2009. Table 17.
a.
Energy-related petroleum products is a term used by the Census Bureau and includes crude oil, petroleum
preparations, and liquefied propane and butane gas.
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 sevennine-month period of January-JulySeptember 2009, the drop in oil prices, year
year over year, combined with reduced demand for energy imports pushed down the overall value of
of energy imports, which dropped to account for 38accounted for 43% of the total merchandise trade deficit over the
seven-month period. This share is down from the same period in 2008, in which the trade deficit
in energy accounted for 46% of the total U.S. merchandise trade deficit.. This share is
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U.S. Trade Deficit and the Impact of Changing Oil Prices
up from the same period in 2008, primarily due to a relatively large drop in the non-petroleum
trade deficit.
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 S ep Nov Jan Mar May Jly S ep Nov Jan Mar May Jly
Jun Aug S ep
Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug
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 tumblingthe prices tumbled 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
of imported energy. At times, crude oil traded for nearly $148 per barrel in July 2008, indicating
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
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 10November 13, 2009. Table 17.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
$820 billion. For 2009, the total cost of energy imports is projected to rise to just less than half
the $438 billion experienced in 2008
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 statesStates and elsewhere is reducinghas reduced 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, aThe return to a positive rate of economic growth likely will place upward
has placed upward pressure on the prices of
energy imports that will increaseis contributing to the nation’s merchandise trade deficit.
Some of this impactthe impact
of this deficit could be offset if some of the dollars that accrue abroad are returned to the U.S. economy
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
foreign acquisitions of U.S. firms, especially by foreign governments, and to concerns about the growing
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 slowingslow 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
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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