U.S. Trade Deficit and the Impact of
Changing Oil Prices

James K. Jackson
Specialist in International Trade and Finance
September 14, 2010
Congressional Research Service
7-5700
www.crs.gov
RS22204
CRS Report for Congress
P
repared 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. After July 2008, however, petroleum prices and import volumes fell at a
historically rapid pace; in January 2009, prices of crude oil fell below $40 per barrel. Since then,
crude oil prices have nearly doubled, while the average monthly volume of imports of energy-
related 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. Should
the U.S. economic recovery falter in the second half of 2010, it could reduce both the volume of
energy imports and the price of those imports compared with earlier estimates. 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 ................................................................................................................................ 1
Issues for Congress ..................................................................................................................... 7

Figures
Figure 1. Quantity of U.S. Imports of Energy-Related Petroleum Products .................................. 3
Figure 2. Value of U.S. Imports of Energy-Related Petroleum Products ....................................... 4
Figure 3. U.S. Import Price of Crude Oil ..................................................................................... 6

Tables
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products, Including
Oil (not seasonally adjusted) .................................................................................................... 2
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil (not
seasonally adjusted) ................................................................................................................. 5

Contacts
Author Contact Information ........................................................................................................ 8

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 85% between February and December 2009, climbing to nearly $80 per barrel at times.
Through the first seven months of 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. Average prices
dropped from May to July, one of only three times average monthly petroleum prices have
declined since January 2009. Prior to this drop in oil prices, futures contracts had indicated that
prices could reach over $80 per barrel by the fall of 2010. 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, and likely will again in 2010. Energy-related 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 2009, the slowdown in the rate of growth in the U.S. economy reduced the amount of energy
the country imported and helped to push down world energy prices. As economic growth
improved, energy imports increased and energy prices rose. 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, 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.
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 2009 and
for 2010 are presented in Table 1. The data indicate that during the first seven months of 2010,
the United States imported about 2.5 billion barrels of energy-related petroleum products, valued
at $188 billion. Energy-related imports for this seven-month period were down 2.5% in volume
terms from the same period in 2009 and cost twice as much as similar imports during the same
period in 2009.

1 U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods and Services,
Table 17, September 9, 2010. 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 July
2009
2010
Quantity
Value ($
Quantity
% change
Value ($
% change
(thousands of
(thousands of
2008 to
2008 to
barrels)
thousands)
barrels)
2009
thousands)
2009
Total energy-
related
petroleum
2,571,251 $127,266,380
2,506,922
-2.5% $188,402,949 48.0%
products
Crude oil
1,976,047
$96,096,639
1,985,853
0.5%
$147,420,352
53.4%

January through December

2009
2010

(Actual values)
(Estimated values)
Quantity
Quantity
% change
% change

Value ($
Value ($
(thousands of
thousands)
(thousands of
2008 to
thousands)
2008 to
barrels)
barrels)
2009
2009
Total energy-
related
petroleum
4,266,007 $245,690,140
4,159,248
-2.5% $363,715,436 48.0%
products
Crude oil
3,314,787
$188,711,775
3,331,236
0.5%
$289,499,785
53.4%
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, September 9, 2010.
Note: Estimates for January through December 2009 were developed by CRS from data through July 2010 and
data through 2009 published by the Census Bureau using a straight line extrapolation.
The data also indicate that the United States imported 4.3 billion barrels of total energy-related
petroleum products in 2009, valued at $246 billion, compared with a total value of $439 billion in
2008. Also, in 2009, the quantity of energy-related petroleum imports fell by 4.0% compared with
the comparable period in 2008; crude oil imports also fell by 2.7% from the same period in 2008.
Year-over-year, the average value of energy-related petroleum products imports fell by 44% in
2009, while the average value of crude oil imports fell by 45%. As Figure 1 shows, imports of
energy-related petroleum products can vary sharply on a monthly basis. In 2009, imports of
energy-related petroleum products averaged about 355 million barrels a month. Through the first
seven months of 2010, such imports averaged 358 million barrels a month.
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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
$440
$420
$400
$380
$360
lions of barrels
Mil $340
$320
$300
ril
ry
ril
ry
ril
ber
ber
Ap
July
m
ua
Ap
July
m
ua
Ap
July
May
br
May
br
May

June

August
March
June
March
June
October
January
Fe


August
October
January
Fe





Nove


Nove










September

December



September

December






































2008
2009
2010

Source: Department of Commerce.
In value terms, energy-related imports fell from $439 billion in 2008 to $245 billion in 2009, or a
decrease of 44%, to account for about 16% of the value of total U.S. merchandise imports.
Energy prices rose sharply in 2007 and continued rising from January through July 2008, not
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 July
2010 was up 15% from the average price in June 2009. Total energy imports in July 2010 rose
slightly from June 2010 to $28.4 billion, up from $23.6 billion in 2009, as indicated in Table 2.
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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
$45
$40
$35
$30
lars
$25
$20
ons of dol
$15
Billi
$10
$5
y
e
y
e
y
e
a
ber
a
ber
a
April
July
uary
April
uary
April
nuary
July
nuary
July

M
Jun
August
March

M
Jun
August
March

M
Jun


October


October






Ja


Ja


September

December
Febr



September

December
Febr









Novem






Novem

















































2008
2009
2010

Source: 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 the seven-month period of January-July 2010, the rise in oil prices, year over year,
combined with a slight decrease in demand for energy imports, pushed up the overall value of
energy imports, which accounted for 42% of the total merchandise trade deficit. This share is up
from the 38% share of the trade deficit experienced during the same period in 2009. In July 2010,
the share of the U.S. trade deficit arising from energy imports was 38%, down from the 46%
recorded in April 2010 due to a 24% increase in the non-energy portion of the trade deficit.
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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 productsa
Crude oil
Thousands
Quantity
Value
Quantity
of barrels
Value
(thousands
($
(thousands of
per day
($
Unit price
Period
of barrels)
thousands)
barrels)
(average)
thousands)
(dollars)
2009
Jan.-Dec. 4,266,007
$245,690,140
3,314,787
9,082 $188,711,775 $56.93
Jan.-July 2,571,251
127,266,380
1,976,047 9,321 96,096,639 48.63
January 405,890
16,398,894
301,069 9,712
12,000,941 39.86
February 335,510
13,586,823 254,504
9,089 9,962,489 39.14
March 378,997
16,084,729
291,514 9,404
12,033,939
41.28
April 366,401
17,354,644
290,973 9,699
13,582,121
46.68
May 337,118
17,682,576
261,296
8,429
13,404,650
51.30
June 371,612
22,515,808
282,057
9,402
16,691,240
59.18
July 375,723
23,642,907
294,634
9,504
18,421,260
62.52
August 339,446
22,459,799
268,878 8,673
17,417,873 64.78
September 361,561 24,845,000 286,200
9,540 19,511,044 68.17
October 328,767
22,416,890 258,420 8,336 17,410,475 67.37
November 314,726 23,011,887 245,925
8,198 17,847,016 72.57
December 350,256 25,690,185 279,317
9,010 20,428,728 73.14
2010
Jan.-July 2,506,922
188,402,949
1,985,853 9,367 147,420,352 74.24
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
April 368,731
28,828,138
294,118 9,804
22,685,592
77.13
May 355,344
27,597,395
280,029
9,033
21,542,988
76.93
June 382,177
28,015,041
311,932
10,398
22,595,686
72.44
July 388,659
28,430,320
311,724
10,056
22,473,270
72.09
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, September 9, 2010.
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,2 imports of crude oil fell from an average of 9.8 million barrels of crude oil

2 Report FT900, U.S. International Transactions in Goods and Services, Table 17, September 9, 2010.
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U.S. Trade Deficit and the Impact of Changing Oil Prices

imports per day in 2008 to an average of 9.1 million barrels per day in 2009, or a decrease of 7%.
In July 2010, such imports averaged 10.1 million barrels per day, or an increase of 5.6% over the
volume of such imports recorded in July 2009. 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
shown in Figure 3. As a result, 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.
Figure 3. U.S. Import Price of Crude Oil
$125
$115
$105
l
$95
barre
$85
$75
rs per
$65
Dolla
$55
$45
$35
ly
t
ly
t
ly
rch
rch
May
ber
ber
ber
ber
ober
May
ober
May
April
June
mber
June
mber
June

Ju
e
bruary
April

Ju
e
bruary
April

Ju



Augus
Ma

Ma

Oct
January


Augus
Oct
January











Septem



Decem

Fe



Septem

Decem

Fe









Nov





Nov


















































2008
2009
2010

Source: Department of Commerce.
Data for 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. 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 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, 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 2009, the imported volume of energy-related petroleum products fell by 44%,
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, energy-related imports fell by
nearly $130 billion as a component in the overall U.S. trade deficit. For 2010, the total cost of
energy imports could rise to about $300 billion at an average price of $75 per barrel 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.
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U.S. Trade Deficit and the Impact of Changing Oil Prices

Issues for Congress
The rise in the prices of energy imports experienced since early 2000 through April 2010 could
have a significant impact on the annual U.S. trade deficit in 2010, should those price increases
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 2010. Various factors,
dominated by the rate of economic growth in the United States and Western 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. 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. The oil spill in the Gulf of Mexico and
concerns over the safety of oil wells in the region could somewhat dampen oil production and
further strain supplies as summer demand increases.
The return to a positive rate of economic growth will continue to place upward pressure on the
prices of energy imports and contribute 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.
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 flatten 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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Author Contact Information

James K. Jackson

Specialist in International Trade and Finance
jjackson@crs.loc.gov, 7-7751


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