U.S. Trade Deficit and the Impact of
Changing Oil Prices
James K. Jackson
Specialist in International Trade and Finance
March 14, 2011
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 more than doubled, while the average monthly volume of imports of energy-
related petroleum products has risen slightly, year over year, reflecting the positive, albeit slow,
rate of growth in economic activity. In addition to the slight rise in the volume of crude oil
imports, the rise in the cost of energy imports in 2010 added about $80 billion to the nation’s
trade deficit in 2010 over that experienced in 2009. Turmoil in the Middle East caused petroleum
prices to rise sharply in the first three months of 2011 and could add $100 billion to the U.S. trade
deficit in 2011. The increase in energy import prices is pushing up the price of energy to
consumers and could spur some elements of the public to pressure the 112th Congress to provide
relief to households that are struggling to meet their current expenses. With oil prices rising to
over $100 per barrel in early 2011, the International Energy Agency cautioned that the rising price
of oil was becoming a threat to the global economic recovery. 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 ..................................................................................................................... 6
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) ................................................................................................................. 4
Contacts
Author Contact Information ........................................................................................................ 7
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. 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. Average prices dropped from May to July, one of
only three times average monthly petroleum prices have declined since January 2009. In
December 2010, petroleum import prices averaged nearly $80 per barrel and continued to
increase, reaching over $100 per barrel at times in February and March 2011. Oil futures
contracts indicate, however, that crude oil prices are expected to peak at the $100 per barrel range
before falling to under $90 per barrel by mid-fall. Turmoil in the Middle East, however, could
have a significant impact on the course of oil prices for 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, 2010, and likely will again in 2011. 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 push down world energy prices. As economic growth has
improved, energy imports have increased and energy prices have risen. 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 2010 and
estimated values for 2011 are presented in Table 1. The data indicate that during 2010, the United
States imported about 4.3 billion barrels of energy-related petroleum products, valued at $323
billion. On average, energy-related imports for 2010 were up 0.3% in volume terms from the
average in 2009 and cost an average of 31% more than similar imports during the same period in
2009. Estimates for 2011 indicate that with an average price per barrel of $100, U.S. imported
petroleum costs will rise by over $100 billion to $428 billion.
1 U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods and Services,
Table 17, March 10, 2011. The report and supporting tables are available at http://www.census.gov/foreign-trade/Press-
Release/current_press_release/ftdpress.pdf.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products,
Including Oil (not seasonally adjusted)
January
2010
2011
Quantity
Value ($
Quantity
% change
% change
(millions of
2010 to
Value ($ billions)
2010 to
barrels)
billions)
(millions of barrels)
2011
2011
Total energy-
related
petroleum
329.2 $24.7 375,303 14.0% $32.2 30.3%
products
Crude
oil 245.3 $18.1 290,666 18.5% $24.5 35.3%
January through December
2010
2011
(Actual values)
(Estimated values)
Quantity
% change
% change
Value ($
Quantity
(millions of
billions)
(millions of barrels)
2010 to
Value ($ billions)
2010 to
barrels)
2011
2011
Total energy-
related
petroleum
4,,278.5 $323.6
4,,877.0 14.0% $421.7 30.3%
products
Crude oil
3,377.7
$252.2
4,002.8
18.5%
$341.1
35.3%
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, March 10, 2011.
Note: Estimates for January through December 2011 were developed by CRS from data in January 2011 and
data through 2010 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 2010, valued at $252 billion, compared with a total value of $246 billion in
2009. 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. In 2010, such
imports averaged 356 million barrels per 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
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2010
Source: Department of Commerce.
In value terms, energy-related imports fell from a total value of $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 a
month in February 2009, reflecting a drop in the price and in the volume of imported oil. The
average price of imported oil in January 2011 was $84 per barrel, an increase of 14% over the
average price per barrel of $74 in January 2010. The value of total energy imports (reflecting the
change in the amount of imports and the change in the price of those imports) in January 2011
rose 4% slightly from December 2010 to $32.2 billion and up from $24.7 billion in January 2010,
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
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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 $517 billion for the
year. In 2010, the rise in oil prices, year over year, combined with a slight increase in energy
imports, pushed up the overall value of energy imports, which accounted for 41% of the total
merchandise trade deficit. In January 2011, the share of the U.S. trade deficit arising from energy
imports was 45%, down slightly from the 47% share recorded in January 2010.
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil
(not seasonally adjusted)
Total energy-related
petroleum productsa
Crude oil
Thousands
Quantity
Quantity
of barrels
(millions of
Value
(millions of
per day
Value
Unit price
Period
barrels)
($ billions)
barrels)
(average)
($ billions)
(dollars)
2009
Jan.-Dec. 4,266.0 $245.7 3,314.8
9,082
$188.7 $56.93
July 375.7
23.6 294.6 9,504 18.4
62.52
August 339.4
22.5 268.9 8,673 17.4
64.78
September
361.6
24.8 286.2 9,540 19.5
68.17
October
328.8
22.4 258.4 8,336 17.4
67.37
November
314.7
23.0 245.9 8,198 17.8
72.57
December
350.3
25.7 279.3 9,010 20.4
73.14
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Total energy-related
petroleum productsa
Crude oil
Thousands
Quantity
Quantity
of barrels
(millions of
Value
(millions of
per day
Value
Unit price
Period
barrels)
($ billions)
barrels)
(average)
($ billions)
(dollars)
2010
Jan.-Dec. 4,278.5 $323.6 3,377.7
9,254
$252.2 74.66
January 329.2
24.7 245.3 7,912 18.1
73.89
February
313.3
23.0 243.3 8,689 17.7
72.92
March 369.5
27.8 299.5 9,660 22.3
74.32
April 368.7
28.8 294.1 9,804 22.7
77.13
May 355.3
27.6 280.0 9,033 21.5
76.93
June 382.2
28.0
311.9
10,398
22.6
72.44
July 388.7
28.4
311.7
10,056
22.5
72.09
August 392.8
29.2 306.9 9,900 22.5 73.47
September
364.7
26.6 289.7 9,656 21.0 72.36
October
330.7
25.0 254.5 8,209 18.9 74.18
November
323.6
25.2 258.2 8,606 19.8 76.81
December
359.8
29.2 262.6 9,115 22.5 79.78
2011
January 375.3 $32.2 290.7 9,376 $24.5 84.34
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, March 10, 2011.
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
imports per day in 2008 to an average of 9.1 million barrels per day in 2009, or a decrease of 7%.
In January 2010, such imports averaged 9.4 million barrels per day, or an increase of 18.5% over
the volume of such imports recorded in January 2010. 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. In 2010, crude oil imports averaged
281 million barrels per month at an average value of $21 billion a month.
2 Report FT900, U.S. International Transactions in Goods and Services, Table 17, March 10, 2011.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Figure 3. U.S. Import Price of Crude Oil
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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 for oil ended 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 size 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% 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, 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 $323 billion at an average price of
$75 per barrel and accounted for 41% of the annual trade deficit.
Issues for Congress
The rise in the prices of energy imports experienced since early 2000 through February 2011
could have a significant impact on the annual U.S. trade deficit in 2011, 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 2011.
Various factors, dominated by the political turmoil in the Middle East and the rate of economic
growth in the United States and Western Europe, have combined 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 as energy prices rose in the
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U.S. Trade Deficit and the Impact of Changing Oil Prices
summer and declined 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 return to a positive rate of economic growth has 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 is creating uncertainty in the oil markets and pushing up prices.
The duration and intensity of the turmoil likely will continue to be the most important factor
driving oil prices. As was the case in 2008, high and sustained oil prices likely will have a
detrimental effect on the pace of economic growth in many parts of the world. 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. Higher oil
prices may well cause consumers to increase pressure on 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 reduce the governments’ budget deficit and to stimulate the
economy should the rate of economic growth stall. 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.
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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