U.S. Trade Deficit and the Impact of
Changing Oil Prices
James K. Jackson
Specialist in International Trade and Finance
November 22, 2013March 14, 2014
Congressional Research Service
7-5700
www.crs.gov
RS22204
U.S. Trade Deficit and the Impact of Changing Oil Prices
Summary
Imported petroleum prices hovered around $95fell from an average price of $102 per barrel of crude oil between January 2013 and
July 2013, before reaching about $100 per barrel of crude oil in August 2013. Although this is
stillin September
2013 to an average price of $91 per barrel in December 2013 and $90 per barrel in January 2014.
Although this is far below the $140 per barrel price reached in 2008, the rising cost of energy is one
among a
number of factors that likely restrained the rate of growth in the economy during the first half through much
of 2013.
The average price of an imported barrel of crude oil in the January-August 2013 period fell 6%
below the comparable period in 2012, the volume of oil imports, or the amount of oil imported,
decreased by nearly 11% from the comparable period in September-December 2013
period fell 10% during the period and average prices for the year were 4% below the average
price per barrel in 2012. Similarly, the volume of oil imports in 2013, or the amount of oil
imported, decreased by 10% from 2012. As a result, the value of imported
crude oil in the January-August period in 2013 fell 2013 fell
nearly 1613% from the comparable period in
value in 2012.
In general, market demand for oil remains highly resistant to changes in oil prices and reflects the
unique nature of the demand for energy-related imports. Turmoil in the Middle East was an
important factor that caused petroleum prices to rise sharply in early 2011 and in 2012. Although
prices for imported crude oil fluctuated somewhat throughout 2011, they averaged 30% higher
than in 2010 and added about $100 billion to the total U.S. trade deficit in 2011. On average,
energy import prices in 2012 were slightly higherEnergy import
prices in 2013 averaged 4% lower than they were in 20112012, pushing updown the price of
energy to consumers
consumers by the end of the year. During the same period, the total amountvolume of petroleum products imported
imported by the United States in 20122013 fell below that imported in 20112012, reducing the overall cost of
of imported energy to the economy and the overall trade deficit. Oil futures markets in November
2013March
2014 indicated that oil traders expect crude oil prices to trend around $94-$9585 per barrel through
late spring by August
2014. During periods when oil prices have spiked above $100 per barrel, some
elements of the
public pressured Congress to provide relief to households that are struggling to
meet their current
expenses. This report provides an estimate of the initial impact of the changing
oil prices on the
nation’s merchandise trade balance.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Contents
Background ...................................................................................................................................... 1
Issues for Congress .......................................................................................................................... 9
Figures
Figure 1. Quantity of U.S. Imports of Energy-Related Petroleum Products.................................... 4
Figure 2. Value of U.S. Imports of Energy-Related Petroleum Products ........................................ 5
Figure 3. U.S. Import Price of Crude Oil......................................................................................... 7
Figure 4. Quantity, Value, and Price of Imported Crude Oil
by the United States, 1973-20112013 ................................................................................................... 8
Tables
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products, Including
Oil (not seasonally adjusted) ........................................................................................................ 3
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil (not
seasonally adjusted) ...................................................................................................................... 5
Contacts
Author Contact Information........................................................................................................... 10
Congressional Research Service
U.S. Trade Deficit and the Impact of Changing Oil Prices
Background
According to data published by the U.S. Census Bureau of the U.S. Department of Commerce,1
the average price of imported petroleum products in 2012 rose 1% over the same period in 2011
to reach an average price of $101.07 per barrel. In 2008, petroleum prices reached nearly $140
per barrel, before falling at a historic rate.2 Generally, petroleum prices rise during the winter and
spring months and then decline in the fall. Following the economic recession in 2009, however,
average petroleum prices fell each month between August 2008 and February 2009, but then
reversed course and rose by 85% between February and December 2009, climbing to nearly $80
per barrel at times. In 2010, petroleum prices reached a peak average price of about $77 per barrel
in April before falling to around $72 per barrel in July 2010. In December 2010, as the pace of
economic growth increased, imported petroleum prices averaged nearly $80 per barrel and
continued to increase, reaching over $112 per barrel at times in March, April, and May 2011.
Petroleum import prices rose in 2012 to peak at an average monthly price of $110 per barrel in
April 2012 before falling to an average price of $95 per barrel in December 2012. In the first
eight months of 2013, oil prices have averaged around $972013, oil prices
averaged around $97 per barrel, about 4% below the average price in 2012. In January 2014,
imported oil prices averaged $90 per barrel. Imported energy products,
primarily crude oil,
account for about one-fourth of the total annual U.S. energy consumption,
measured in btus.3
Oil futures contracts in November 2013 indicate thatmarkets in March 2014 indicated that oil traders expected crude oil prices are expected to averageto trend
around $94-$95 per barrel through late spring 2014, reflecting the prospect of a slow rate of
economic growth in most geographic regions85 per barrel by August 2014. Turmoil in the Middle East, natural disasters,
hurricanes,
and droughts, however, could have a significant impact on the course of oil prices for
the the
foreseeable future. As a result of changing petroleum prices, the price changes in imported
energy-related petroleum products worsened the U.S. trade deficit in 2006-2008 and 2010-2011.4
Relatively steady prices in 2012,Oil prices in 2013 averaged less than those in 2012; combined with a decline in the volume of oil
imported, resulted
in a slight decline in the role of energy imports in the nation’s trade deficit from 40%
of the overall deficit in 2012 to 33% in 2013. If the trends set in the
January-August 2013 period2013 and January 2014 continue through the end of the year
through 2014, lower crude oil prices
combined with a lower quantity of imported crude oil could
reduce the overall U.S. trade deficit
by $50 to $70 billion in 20132014 from that recorded in 2012. Energy-related2013. Energyrelated petroleum products is a
term used by the U.S. 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.
In isolation from other events, lower energy prices tend to aid the U.S. economy by making it a
more attractive destination for foreign investment. Such capital inflows, however, 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
U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods and Services,
Table 17, October 24, 2013March 7, 2014. The report and supporting tables are available at http://www.census.gov/foreign-trade/
Press-ReleasePressRelease/current_press_release/ftdpress.pdf.
2
For information about the causes of the run up in oil prices, see Hamilton, James, Causes and Consequences of the Oil
Shock of 2007-2008, Brookings Papers on Economic Activity, Spring 2009.
3
Monthly Energy Review, U.S. Energy Information Administration, October 2013February 2014, p. 3.
4
For additional information about U.S. oil imports, see out-of-print CRS Report R41765, U.S. Oil Imports: Context
and Considerations, by Neelesh Nerurkar, available upon request.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
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 20122013 and
20132014 are presented in Table 1. The data indicate that during 20122013, the United States imported
about 3.85 billion barrels of energy-related petroleum products, valued at $397352 billion. On average,
energy-related imports for 20122013 were down 7.67% in volume terms from the average amount in
20112013 and cost an average of 611% less than similar imports during the same period in 20112012. These
data demonstrate that U.S.
demand for oil imports responds slowly to changes in oil prices.
According to various studies,
U.S. demand for oil is correlated more closely to U.S. per capita
income than to changes in oil
prices.5 Data for 20122013 indicate that with the average price per barrel
of oil of around $101, U.S.
imported petroleum costs fell by $2446 billion in 20122013 from the amount
recorded in 2011 to reach $398 billion2012.
The data also indicate that in the January-August period in 2013January 2014, the quantity of energy-related
petroleum imports fell by 8.6
by 4.7% compared with the comparable period in 2012; crude oil imports
in the same eight-month period in 2013 fell by 10.7% from the same period in 2012. Year-overyear2013; crude oil imports in January 2014 fell by
1.6% from January 2013. Compared with January 2013, the average value of energy-related
petroleum products imports fell by 5.88.2% in 20122014, while
the average value of crude oil imports fell by 5.7%. In 2012, the quantity of energy-related
petroleum imports fell 7.8% from the comparable period in 2011 as the pace of economic growth
slowed. Crude oil imports fell by 7.0% from the amount imported in 2011.
by 5.7%.
As Figure 1 shows, imports of energy-related petroleum products can vary sharply on a monthly
basis. In the January-August period of 2013January 2014, imports of energy-related petroleum products
averaged about 300256 million
barrels per month, compared with an average of 327261 million barrels per
month in the comparable period in 2012, month in January 2013,
or a decrease of 81.6%.
5
Hamilton, Causes and Consequences of the Oil Shock of 2007-2008; World Economic Outlook, Chapter 3,
International Monetary Fund, April 2011. According to the IMF, for developed economies, a 10% increase in oil prices
is estimated to result in a 0.2% decrease in oil consumption, but a 10% increase in income leads to a 6.8% increase in
oil consumption.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products,
Including Oil (not seasonally adjusted)
January through August
2012
2013
2013
2014
Quantity
(millions of
barrels)
Value ($
billions)
Quantity
(millions of barrels)
% change
2011 to
2012
Value ($ billions)
% change
2012 to
20132013 to
2014
Total energyrelated
petroleum
products
2,622.8
$274.3
2,397.3
-8.6%
$238.4
-13.1%
Crude oil
2,121.3
$212.7
1,893.4
-10.7%
$183.6
-15326.8
$31.7
311.6
-4.7%
$29.1
-8.2%
Crude oil
260.7
$24.5
256.5
-1.6%
$23.1
-5.7%
January through December
2012
20132013
2014
(Actual values)
(Estimated values)
Quantity
(millions of
barrels)
Value ($
billions)
Quantity
(millions of barrels)
% change
2012 to
20132013 to
2014
Value ($ billions)
% change
2012 to
2013
Total energyrelated
petroleum
products
3,842.1
$397.1
3,511.7
-8.6%
$345.1
-13.1%
Crude oil
3,092.2
$312.8
2,760.0
-10.7%
$263.8
-15544.6
$351.7
3,379.5
-4.7%
$322.7
-8.2%
Crude oil
2,808.7
$272.5
2,763.2
-1.6%
$257.1
-5.7%
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, October 24, 2013March 7, 2014.
Note: Estimates for January through December 2013 were developed by CRS from data in January-August,
2013, 2014, and data through 2012
data for 2013 published by the Census Bureau using a straight line extrapolation.
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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
Source: U.S. Department of Commerce.
In value terms,As indicated in Table 2, the dollar value of energy-related imports fell from a total value of $421 397
billion in 20112012 to $397
352 billion in 20122013, or a decrease of 5.711.4%, to account for about 1816% of the
value of total U.S.
merchandise imports. In previous periods, energy prices rose sharply in 2007
and continued rising
from January through July 2008, not following previous trends of falling
during the winter
months. 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 a
month in February 2009, reflecting a drop in the price and in the volume of
imported oil. As
Figure 2 shows, the average price of imported oil in August 2013 was $100.26, up 6% from an
January 2014 was $90.21,
down 4% from an average of $94.48 in August 201208 in January 2013, and stands as the highestlowest average monthly
value recorded
since May 2012, as indicated in Table 2 since February 2011.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Figure 2. Value of U.S. Imports of Energy-Related Petroleum Products
Source: U.S. Department of Commerce.
As a result of the drop in the overall value of energy-related imports in 2009, the trade deficit in
energy-related imports amounted to $204 billion, down by nearly half from the $386 billion
recorded in 2008, and accounted for 40% of the total U.S. trade deficit of $517 billion for the
year. In 2011, the rise in oil prices, year over year, combined with a slight decrease in energy
imports, pushed up the overall value of energy imports, which accounted for 44% of the total
merchandise trade deficit. In 2012, the share of the U.S. trade deficit attributed to energy imports
on an annual basis was 40%; the share in December 2012 was 33%, down from 42% recorded in
December 2011. In August 2013, however, 2013, the share of the U.S. trade deficit attributable to
energy imports was at 32
33%, down from 40% recorded in Augustin 2012.
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil
(not seasonally adjusted)
Total energy-related
petroleum productsa
Period
Quantity
(millions of
barrels)
Value
($ billions)
Crude oil
Quantity
(millions of
barrels)
Thousands
of barrels
per day
(average)
Value
($ billions)
Unit price
(dollars)
20122013
Jan.-Dec.
3,848.2544.6
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397.5
3,094.2
8,454
313.0
101.16$351.7
2,808.7
7,691
$272.5
$97.01
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Total energy-related
petroleum productsa
Crude oil
Quantity
(millions of
barrels)
Quantity
(millions of
barrels)
Value
($ billions)
2,622.8
$274.3
2,121.3
January
343.8
$35.9
February
282.5
March
Thousands
of barrels
per day
(average)
Value
($ billions)
Unit price
(dollars)
8,694
$217.7
$102.64
269.7
8,700
28.0
103.78
29.9
225.0
7,760
23.3
103.63
331.1
36.5
271.8
8,768
29.4
108.03
April
325.6
36.5
270.4
9,012
29.7
109.69
May
330.0
36.2
263.4
8,732
29.3
108.06
June
331.6
33.5
277.5
8,781
26.4
100.13
July
337.8
32.3
272.8
8,950
26.0
93.71
August
340.5
33.4
245.7
8,801
25.8
94.48
September
306.4
31.4
259.4
8,190
24.3
98.90
October
322.7
33.1
243.0
8,376
25.9
99.75
November
306.1
30.6
222.9
8,099
23.7
97.45
December
284.0
27.6
257.7
7,189
21.2
95.16
Period
Jan.-August
2013
Jan.-August
2,397.3
238.4
1,893.4
7,792
183.6
96.97
Quantity
(millions of
barrels)
Period
Value
($ billions)
Crude oil
Quantity
(millions of
barrels)
Thousands
of barrels
per day
(average)
Value
($ billions)
Unit price
(dollars)
January
326.8
31.7
260.7
8,411
24.5
94.08
February
261.0
25.8
204.8
7,313
19.6
95.96
March
280.3
28.2
215.7
6,959
20.9
96.95
April
295.9
29.7
233.2
7,774
22.8
97.82
May
311.4
30.8
240.5
7,759
23.3
96.84
June
291.4
28.7
234.3
7,811
22.7
96.93
July
327.2
32.5
264.2
8,523
25.6
97.07
August
303.2
31.0
239.9
7,739
24.1
100.26
September
289.9
30.0
229.8
7,661
23.4
102.00
October
306.4
31.0
242.4
7,820
24.2
99.96
November
265.9
25.6
212.7
7,091
20.1
94.69
December
286.1
26.7
230.3
7,428
21.0
91.34
8,275
23.1
90.21
2014
January
311.6
29.1
256.5
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, October 24, 2013March 7, 2014.
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.
Crude oil comprises the largest share of energy-related petroleum products imports. According to
Census Bureau data,6 imports of crude oil fell from an average of 9.8 million barrels of crude oil
imports per day in 2008 to an average of 9.1 million barrels per day in 2009, or a decrease of 7%,
mirroring the sharp drop in economic activity. From January 2008 to June 2008, the average price
of crude oil increased from $84 per barrel to $117 per barrel, or an increase of 39%. As a result,
6
Report FT900, U.S. International Transactions in Goods and Services, Table 17, October 24, 2013.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
the value of U.S. crude oil imports rose from about $27 billion a month in January 2008 to $35
billion a month in June 2008. In 2011, crude oil imports averaged 277 million barrels per month
at an average value of $27.6 billion a month. Oil import prices in 2011 rose from about $84 per
barrel in January 2011 to an average of $104.1 in December 2011. As shown in Figure 3, oil
import prices rose steadily between September 2010 and May 2011, fell from June 2011 to
October 2011, and then rose again through December 2011. In December 2012, imports of crude
oil averaged 7.2 million barrels per day, or a decrease of 20% from the volume of such imports
recorded in December 2011, and an increase of 1% over June 2012. Crude oil prices rose from an
average of $94 per barrel in January 2013 to $100.3102 per barrel in AugustSeptember 2013, the highest
average monthly value recorded up to that point in 2013.
, but fell to an average imported price of
$91.34 in December 2013.
6
Report FT900, U.S. International Transactions in Goods and Services, Table 17, March 7, 2014.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Figure 3. U.S. Import Price of Crude Oil
Source: U.S. Department of Commerce.
As previously indicated, the combination of changes in the volume, value, and prices of crude oil
can have a large impact on the total value of U.S. imports and on the size of the U.S. trade deficit.
Figure 4 shows the annual amounts of the volume, value, and price of U.S. crude oil imports
from 1973 to 20122013, represented in index terms with 1990 as the base year. The data indicate that
the overall volume of U.S. imports of crude oil increased by about 4027% between 1990 and 20122013
in index terms. The price of crude oil, represented by the average price of a barrel of crude oil on
an annual basis, rose by fourfive times between 1990 and 20122013 in index terms. As a result, the total
value of U.S. crude oil imports, representing the price per barrel times the number of barrels of
crude oil on an annual basis, rose by over six times between 1990 and 20122013 on an index number
basis.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Figure 4. Quantity, Value, and Price of Imported Crude Oil
by the United States, 1973-20112013
(Index terms; 1990 = 100)
Source: U.S. Department of Commerce.
Data for 2008 and 2009 indicate that a number of factors, primarily the economic recession, had a
large impact on pushing down oil prices in the first three months of 2009. As economic growth
picked up, the higher demand for oil tended to raise pressure on oil prices, which rose through the
end of the year. The rise in oil prices and an increase in the volumes of oil imports during the
period combined to raise the overall cost of imported energy. At times, crude oil traded for nearly
$148 per barrel in July 2008, translating into higher imported energy costs that had a significant
impact on the overall costs of U.S. imports and on the size of the U.S. trade deficit. Since those
record prices, the price of imported crude oil fell to under $40 per barrel at times in January and
February 2009. For the year 2009, the imported volume of energy-related petroleum products fell
by 44% compared with 2008, due in large part to a slowdown in economic activity. At an average
price of $56 per barrel in 2009, compared with an average price of $95 per barrel in 2008, energyrelated imports fell by nearly $130 billion as a component in the overall U.S. trade deficit. For
2010, the total cost of energy imports rose to $323 billion at an average price of $75 per barrel
and accounted for 41% of the annual trade deficit.
In 2012, at an average price of imported energy of about $101 per barrel, the total cost of energy
imports was $397 billion, or about $25 billion, or (5.8%,) less than the cost of energy imports in
2011, thereby reducing slightly the contribution of energy-related products to the overall U.S.
trade deficit. At the average price through the first eight months of 2013, the contribution of
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U.S. Trade Deficit and the Impact of Changing Oil Prices
January 2014, the contribution of energy imports to the
overall trade deficit in 20132014 could fall by $50 – $70 billion from that
recorded in 2012.
2013.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Issues for Congress
The risefall in the prices of energy imports in 20122013 compared with 2012, combined with a decrease in
the total volume of
energy imports resulted in a smaller contribution to the overall U.S. trade
deficit in 20122013. If the
trend set in the first eight months of 2013 continues2013 and January 2014, the contribution of energy imports to the
the overall U.S. trade deficit will fall by year-end 20132014. The ubiquitous nature of oil in the economy
economy generally means that changes in energy prices will affect the U.S. rate of inflation and
the rate of
economic growth. Various factors, dominated by events in the Middle East and , a
slowdown in the
rate of economic growth in Asia and other developing economies, and increase
in natural gas production in the United States combined in 2013combined in 2012 to push the
cost of energy
imports slightly lower than in 20112012. The pace of economic growth, however,
stalled in the second quarter of 2012, was a bit erratic in 2013,
which had an important effect on both the levels of oil
imports and on the price of such imports.
Typically, energy import prices have followed a cyclical
pattern as energy prices rise in the
summer months and fall in the winter. The slowdown in the
rate of economic growth in the
United States and elsewhere in 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 and droughts in the mid-Western United States that
can reduce the production of
corn and, therefore, the availability of ethanol, which puts upward
pressure on gasoline prices.
The return to a positive rate of economic growth in 2010 placed upward pressure on the prices of
energy imports and contributed to the nation’s merchandise trade deficit. Some of the 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
other assets as corporate securities or acquisitions of U.S. businesses. Some of the return in
dollars likely will come through sovereign wealth funds, 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.
Social turmoil in the Middle East created uncertainty in the oil markets in 2011 and into 2012 and
was an important factor driving up oil prices. In 2013, slower-than-expected economic growth in
various regions of the world reduced slightly the demand for oil and pushed down the average
price of energy imports. Increased energy production in the United States also reduced the
amount of energy imports, which may well have contributed to the forces that tended to draw
down the price of energy on world markets. Higher prices for energy imports may have been one
contributing factor in spurring the economy to improve its energy efficiency, find alternative sources
sources of energy, or search out additional supplies of energy. For Congress, the nation’s merchandise
merchandise trade deficit could add to existing inflationary pressures and complicate efforts to
reduce the
government’s budget deficit and to stimulate the economy should the rate of economic growth
stall
growth continue at a pace that is below its long-run potential. 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. An increase in the trade
deficit may also add to pressures for Congress to
examine the causes of the deficit and to address
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U.S. Trade Deficit and the Impact of Changing Oil Prices
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.
strategy.
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Author Contact Information
James K. Jackson
Specialist in International Trade and Finance
jjackson@crs.loc.gov, 7-7751
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