U.S. Trade Deficit and the Impact of Changing
Oil Prices
James K. Jackson
Specialist in International Trade and Finance
NovemberMay 13, 20092010
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 JulyAfter July 2008, however, petroleum prices and import volumes have fallenfell at a
historically rapid pace; in January 2009, prices of crude oil fell below $40 per barrel. At the same
timeSince then,
crude oil prices have nearly doubled, while 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 import 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 September 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
energyrelated petroleum products has fallen nearly 10% year over year. Despite the drop in the volume
of crude oil imports, the rise in the cost of energy imports through 2009 and early 2010 could add
more than $100 billion to the nation’s trade deficit in 2010 over that experienced in 2009. The
strength of the U.S. economic recovery in the second half of 2010 could increase both the volume
of energy imports and the price of those imports. This report provides an estimate of the initial
impact of the changing oil prices on the nation’s merchandise 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 between August 2008 and February 2009, average petroleum prices reversed course and
rose by 6585% between February and SeptemberDecember 2009, climbing to nearly $80 per barrel at times.
Through the first three months of 2010, petroleum prices have hovered around $74 per barrel, but
futures contracts indicate that prices could reach about $85 per barrel by the fall of 2010. As a
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. 2008, and likely will again in 2010.
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 energy-related imports. TheIn 2009, the slowdown in the
rate of growth in the U.S. economy
reduced the amount of energy the country imports and imported 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.
Summary data from the Census Bureau for the change in the volume, or quantity, of energyrelated petroleum imports and the change in the price, or the value, of those imports for 20082009 and
for 20092010 are presented in Table 1. The data indicate that during the first ninethree months of 20092010, the
United States imported 3,3721,012 million barrels of energy-related petroleum products, valued at
$174 $76
billion. Energy-related imports for this ninethree-month period were down 5.29.5% in volume terms
from the same period in 2008 and cost slightly less than half the value of2009 and cost nearly twice as much as such imports during the
same same
period in 20082009.
The data also indicate that the United States imported 4.63 billion barrels of total energy-related
petroleum products in 20082009, valued at $439245 billion, compared with a total value of $319439 billion in
20072008. Also, in 20082009, the quantity of energy-related petroleum imports fell by 4.0% compared with
the comparable period in 20072008; crude oil imports also fell by 2.7% from the same period in 20072008.
Year-over-year, the average value of energy-related petroleum products imports rose by 37.6fell by 44%,
while the average value of crude oil imports rose by 44.2fell by 45%. As Figure 1 shows, imports of
energy-related energyrelated petroleum products can vary sharply on a monthly basis. In 20082009, imports of
energy-related energyrelated petroleum products averaged about 384355 million barrels a month, but through the
first nine months of 2009. Through the first three
months of 2010, such imports have averaged 363337 million barrels a month, primarily due to low
imports in February.
1
Census Bureau, Department of Commerce. Report FT900, U.S. International Trade in Goods and Services,
November 13, 2009 May 12,
2010. Table 17. The report and supporting tables are available at http://www.census.gov/foreign-trade/
Press-Release/
current_press_release/ftdpress.pdf.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products,
Including Oil (not seasonally adjusted)
January through September
2008
2009March
2009
Total energyrelated
Petroleum
Products
Crude oil
2010
Quantity
(thousands of
barrels)
Value ($
thousands)
Quantity
(thousands of
barrels)
% change
2008 to
2009
Value ($
thousands)
% change
2008 to
2009
Total energyrelated
Petroleum
Products
3,114,482
$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
-55.01,118,040
$46,007,956
1,012,011
-9.5%
$75,532,056
64.2%
844,703
$33,926,909
788,051
-6.7%
$58,122,816
71.3%
January through December
2008
20092009
2010
(Actual values)
(Estimated values)
Quantity
(thousands of
barrels)
Value ($
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
4,310,397
-6.6%
$202,826,259
-53.8%
Crude oil
3,591,136
$341,978,528
3,306,663
-7.9%
$153,873,963
-55.0263,292
$245,482,572
3,858,984
-9.5%
$403,012,978
64.2%
Crude oil
3,311,883
$188,498,323
3,089,764
-6.7%
$322,912,044
71.3%
Source: Census Bureau, Department of Commerce. Report FT900, U.S. International Trade in Goods and Services,
November 13, 2009May 12, 2010. Table 17.
Note: Estimates for January through December 2009 were developed by CRS from data through September
2009 March 2010
and data through 20082009 published by the Census Bureau using a straight line extrapolation.
In value terms, energy-related imports rosefell from $319439 billion in 20072008 to $439245 billion in 2008, or
an increase of 382009, or a
decrease of 44%, to account for about 2216% of the value of total U.S. merchandise imports. The
sharp rise experienced in energy prices in 2007
Energy prices rose sharply in 2007 and continued from January through July 2008 and
did, not follow following
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
September 2009 was down 37 March 2010 was up
80% from the average price in July 2008, reflecting the sharp decrease
in the price of imported oil in August 2008 through FebruaryMarch 2009. Energy imports accounted for $27 billion a month in
March 2010, up from $16 billion a month in 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
S ep Nov 320
310
Jan Mar May Jly S ep Nov Jan Mar May Jly S ep
Oct Dec Nov Jan Mar
Feb. Apr Jun Aug Oct Dec Feb Apr Jun Aug
2007 Oct Dec Feb
2008
2009
2010
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
$12
S ep Nov Jan Mar May Jly S ep Nov Jan Mar May Jly S ep
Oct Dec Nov Jan Mar
Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug
2007
2009
2008
Oct Dec Feb
2008
2009
2010
Source: Department of Commerce
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil
(not seasonally adjusted)
Total energy-related
petroleum products
Period
Quantity
(thousands
of barrels)
Period
Value
($
thousands)
Crude oil
Quantity
(thousands of
barrels)
Thousands
of barrels
per day
(average)
Value
($
thousands)
Unit price
(dollars)
20082009
Jan.-Dec.
4,613,444
$438,686,820
3,590,628
9,810
$341,912,489
$95.22
Jan.-Sept.
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.-Sept.
3,271,740
$174,513,474
2,530,537
9,269
$132,969,541
$52.55263,292
$245,482,572
3,311,883
9,074
$188,498,323
$56.92
Jan.-Mar.
1,118,040
46,007,956
844,703
9,386
33,928,909
40.17
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
October
329,245
22,450,143
258,829
8,349
17,441,313
67.39
November
314,238
22,969,832
245,448
8,182
17,805,957
72.54
December
348,069
25,549,123
277,069
8,938
20,281,513
73
2010
Jan.-Mar.
1,012,011
75,532,056
788,051
8,756
58,122,816
73.76
January
329,246
24,681,956
245,273
7,912
18,122,185
73.89
February
313,293
23,040,666
243,305
8,689
17,742,303
72.92
March
369,473
27,809,434
299,473
9,660
22,258,328
74.32
Source: Census Bureau, Department of Commerce. Report FT900, U.S. International Transactions in Goods and
Services. November 13, 2009May 12, 2010. 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 risedrop in the overall value of energy-related imports in 20082009, the trade
deficit in
energy-related imports amounted to $386204 billion, or 47down by nearly half from the $386
billion recorded in 2008, and accounted for 40% of the total U.S. trade deficit of $821
517 billion for
the year. In the ninethree-month period of January-September 2009, the dropMarch 2010, the rise in oil prices,
year over year,
combined with reducedan increased demand for energy imports, pushed downup the overall value
of energy
imports, which accounted for 4346% of the total 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.
up from the
34% share of the trade deficit experienced during the same period in 2009.
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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 10.119.8 million barrels of crude
oil oil
imports per day in 20072008 to an average of 9.81 million barrels per day in 20082009, or a decrease of
3%. In December 2008 7%.
In March 2010, such imports averaged 10.39.7 million barrels per day, or an increase of
7 3.4% over the
volume of such imports recorded in December 2007. From June 2007 to June
March 2009. From January 2008 to June 2008, the average
price of crude oil increased from $6184 per barrel to $117 per barrel, or an
increase of 9239%, as
shown in Figure 3. As a result, the value of U.S. crude oil imports rose from
about $1927 billion a
month in June 2007January 2008 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
S ep Nov Jan Mar May Jly S ep Nov Jan Mar May Jly S ep
Oct Dec Nov Jan Mar
Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug
2007
Oct Dec Feb
2008
2009
2010
Source: Department of Commerce
Data for 20082009 indicate that a number of factors combined to push oil prices to record levels in
July 2008, before the prices tumbled quickly. The sharp rise in oil prices combined with a small
decrease, primarily the economic recession, had a large
impact on pushing down oil prices in the first three months. As economic growth picked up, the
higher demand tended to raise pressure on oil prices, which rose through the end of the year. The
rise in oil prices combined with an increase in the volumes of oil imports experienced during the period to post a large jump in the
period combined to raise the overall cost 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 20082009, the imported volume of energy-related petroleum
products fell by 4.044%, due in
large part to a slowdown in economic activity. At an average price of $95
$56 per barrel in 2009, compared
with an average price of $6495 per barrel in 20072008, 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 overfell by nearly $130 billion as a factor in the overall U.S. trade deficit. For 2010, the total
cost of energy imports could rise to more than $300 billion at an average price of $75 per barrel
2
Report FT900, U.S. International Trade in Goods and Services, November 13, 2009May 12, 2010. 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 and could rise to nearly $330 billion at an average price of $85 per barrel and account for nearly
half of the annual trade deficit.
Issues for Congress
The rise in the prices of energy imports experienced since early 2007 through July 2008 was
expected to2000 through March 2010 could
have a significant impact on the annual U.S. trade deficit in 2010, should those price increase
stick, or run even higher. The rise in energy prices may well affect the U.S. rate of inflation and
could have a slightly negative impact on the rate of
economic growth in 20082010. Various factors,
dominated by the sharp slowdown in the rate of
rate of economic growth in the United States and most other areas of the world, are combining to push
down the cost of energy importsWestern Europe, could
combine to push up the cost of energy imports, which will have a slightly negative impact on the
pace of the economic recovery. Typically, energy import prices have followed a cyclical pattern
that has caused energy prices to rise in the summer and decline in the winter. AThe slowdown in
the rate of economic growth
in the United States and elsewhere hasin 2009 sharply 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 of Mexico The oil spill in the Gulf of Mexico and
concerns over the safety of oil wells in the region could dampen somewhat oil production and
further strain supplies as summer demand increases.
The return to a positive rate of economic growth has placedwill continue to place upward pressure on the
prices of
energy imports that is contributingand contribute to the nation’s merchandise trade deficit. Some of the impact
impact of this deficit could be offset if some of the dollars that accrue abroad are returned to the
U.S.
economy through increased purchases of U.S. goods and services or through purchases of such
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 downflatten out. 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 slow 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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