U.S. Trade Deficit and the Impact of
Changing Oil Prices
James K. Jackson
Specialist in International Trade and Finance
April 13, 2012
Congressional Research Service
7-5700
www.crs.gov
RS22204
CRS Report for Congress
Pr
epared for Members and Committees of Congress
U.S. Trade Deficit and the Impact of Changing Oil Prices
Summary
Petroleum prices rose sharply between September 2010 and June 2011, at times reaching more
than $112 per barrel of crude oil. Although this is still below the $140 per barrel price reached in
2008, the rising cost of energy was one factor that helped to dampen the rate of growth in the
economy during the second half of 2011. While the price of oil was rising, the volume of oil
imports, or the amount of oil imported, decreased slightly. Overall resistance by market demand
to changes in oil prices reflects the unique nature of the demand for oil and an increase in
economic activity that occurred following the worst part of the economic recession in 2009.
Turmoil in the Middle East was an important factor causing petroleum prices to rise sharply in the
first four months of 2011. Although prices for imported oil fluctuated somewhat throughout the
year, they averaged 30% higher than in 2010 and added about $100 billion to the total 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............................................................................................................. 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 during the first two months of 2012 rose 20% over the same period in 2011
to reach an average price of $103 per barrel. In 2008, petroleum prices reached nearly $140 per
barrel, before falling at a historic rate.2 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 had declined since January 2009. In December 2010, petroleum import 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 then trended downward through the end
of 2011, falling to an average price of $99.71 per barrel in December 2011. Oil futures contracts
indicate that crude oil prices are expected to rise to about $105 per barrel by fall 2012. Turmoil in
the Middle East, natural disasters, and hurricanes, 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, and 2010-2011 and could again in 2012.3 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. Economic growth improved
through 2010 and into the first half of 2011, driving up energy imports and energy prices.
Although the pace of economic growth in the United States and Europe in the last half of 2011,
petroleum prices moderated only slightly. 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 2011 and
estimated values for 2012 are presented in Table 1. The data indicate that during 2011, the United
States imported about 4.2 billion barrels of energy-related petroleum products, valued at $421
billion. On average, energy-related imports for 2011 were down 2.7% in volume terms from the
average amount in 2010 and cost an average of 30% more than similar imports during the same
period in 2010. These data demonstrate that U.S. demand for oil imports is highly resistant to
1 U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods and Services,
Table 17, April 12, 2012. The report and supporting tables are available at http://www.census.gov/foreign-trade/Press-
Release/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 For additional information about U.S. oil imports see CRS Report R41765, U.S. Oil Imports: Context and
Considerations, by Neelesh Nerurkar.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
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.4 Based on two-moths of data, estimates
for 2012 indicate that with the average price of around $103 per barrel, U.S. imported petroleum
costs could rise by about $50 billion in 2012 to reach $468 billion.
Table 1. Summary Data of U.S. Imports of Energy-Related Petroleum Products,
Including Oil (not seasonally adjusted)
January - February
2011
2012
Quantity
Value ($
Quantity
% change
% change
(millions of
billions)
(millions of barrels)
2011 to
Value ($ billions)
2011 to
barrels)
2012
2012
Total energy-
related
682.6 $59.4
628.4 -7.9% $66.0 11.2%
petroleum
products
Crude oil
533.0
$45.6
496.4
-6.9%
$51.5
12.8%
January through December
2011
2012
(Actual values)
(Estimated values)
Quantity
Value ($
Quantity
% change
% change
(millions of
billions)
(millions of barrels)
2010 to
Value ($ billions)
2010 to
barrels)
2011
2011
Total energy-
related
4,165.0 $421.4
3,834.4 -7.9% $468.5 11.2%
petroleum
products
Crude
oil 3,324.3 $331.7 3,096.0 -6.9% $374.2 12.8%
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, April 12, 2012.
Note: Estimates for January through December 2012 were developed by CRS from data in January-February,
2012, and data through 2011 published by the Census Bureau using a straight line extrapolation.
The data also indicate that in 2011, the quantity of energy-related petroleum imports fell by 2.7%
compared with the comparable period in 2010; crude oil imports fell by 1.6% from the same
period in 2010. Year-over-year, the average value of energy-related petroleum products imports
rose by 30% in 2011, while the average value of crude oil imports rose by 31.5%. As Figure 1
shows, imports of energy-related petroleum products can vary sharply on a monthly basis. In
2011, imports of energy-related petroleum products averaged about 347 million barrels per
month.
4 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
Figure 1. Quantity of U.S. Imports of Energy-Related Petroleum Products
440
420
400
rels
380
bar
360
ilions of
M 340
320
300
y
y
y
y
ly g p t
pril
er
er
er
er
une
ber
ber
rch pril
une
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ber
rch pril
une
ber
ber
rch pril
Oc ber
A
July
A
July
A
July
A
June Ju Au Se
Ma J
ugust
ctober
J
ugust
ctober
J
ugust
ctober
cemb
ebruary
Ma
cemb
ebruary
Ma
cemb
ebruary
Ma
cemb
ebruary
A ptem
ovem
Ma
A ptem
ovem
Ma
A ptem
ovem
Ma
ovem
O N
January
O
January
O
January
January
F
N
F
N
F
N
F
De
De
De
De
Se
Se
Se
2008
2009
2010
2011
2012
Source: Department of Commerce.
In value terms, energy-related imports rose from a total value of $324 billion in 2010 to $421
billion in 2011, or an increase of 30%, to account for about 20% 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. 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 February 2012 was $103.6, up 19% from an average of $87.2 in February 2011, but down
slightly from the average price per barrel of $103.8 in January 2012. As Figure 2 shows, the
value of total energy imports (reflecting the change in the amount of imports and the change in
the price of those imports) in February 2012 fell 16.8% from January 2012 to reach about $30.0
billion, but up about 10% from the total value of energy imports in February 2011, 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
s
$30
llar
$25
f do
o
$20
ns
$15
Billio
$10
$5
ril y e ly st
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ril y e ly st
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ry
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u
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ry
g ber
a rch
g ber
a rch
g ber
a rch
Aug Sep Oc
a
A M Ju Ju
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tober mb mb
ru
mb
ru
ru
June Ju
ru
b Ma A M Ju u
tober
mb
mb
b Ma A M Ju u
tober
mb
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b Ma A M
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b
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ve ce anuary e
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N
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N
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Sept D Sept D Sept D
D
2008
2009
2010
2011
2012
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 $517 billion for the
year. In 2011, the rise in oil prices, year over year, combined with a slight decrease in energy
imports, pushed up the overall value of energy imports, which accounted for 44% of the total
merchandise trade deficit. In February 2012, the share of the U.S. trade deficit arising from
energy imports was 45%, up from the 43% recorded in February 2011.
Table 2. U.S. Imports of Energy-Related Petroleum Products, Including Crude Oil
(not seasonally adjusted)
Total energy-related
petroleum productsa
Crude oil
Thousands
Quantity
Quantity
of barrels
(millions of
Value
(millions of
per day
Value
Unit price
Period
barrels)
($ billions)
barrels)
(average)
($ billions)
(dollars)
2011
Jan.-Dec. 4,165.0 421.4 3,324.3 9,108
331,698.1 99.78
Jan.-Feb. 682.6 59.4 533.0 9,035 45.6 85.63
January 375.3
32.2 290.7
9,376 24.5
84.34
February 307.3 27.2 242.4 8,656 21.1 87.17
March 371.4
35.7 295.1
9,520
27.7
93.76
April 329.2
35.0 252.2
8,408
26..0
103.18
May 350.7
38.8
275.3
8,879
29.9
108.70
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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)
June 366.8
39.4
296.7
9,889
31.4
106.00
July 350.9
37.2
281.1
9,067
29.5
104.27
August 365.4
38.0 302.5
9,757
31.0
102.62
September 343.6 35.1
280.1 9,338 28.3 101.02
October 325.9 32.6 263.2 8,490 26.0 98.84
November 336.9 34.8
266.2 8,874 27.3 102.50
December 341.8 35.5
278.9 8,998 29.0 104.13
2012
Jan.-Feb. 628.4 66.0 496.4 8,274 51.5
103.73
January 344.8
36.1 270.7
8,733 28.1
103.81
February 283.7 30.0 225.7 7,783 23.4
103.63
Source: U.S. Department of Commerce, U.S. Census Bureau, Report FT900, U.S. International Trade in Goods
and Services, Table 17, April 12, 2012.
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,5 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 February 2012, such imports averaged 7.8 million barrels per day, or a decrease of 10.0% from
the volume of such imports recorded in February 2011, and a drop of 11% from January 2012.
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, 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.
Prices have fallen slightly from in January and February 2012 compared with the prices in
December 2011.
5 Report FT900, U.S. International Transactions in Goods and Services, Table 17, April 12, 2012.
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U.S. Trade Deficit and the Impact of Changing Oil Prices
Figure 3. U.S. Import Price of Crude Oil
$125
$115
$105
$95
rrel
r ba
$85
$75
olars pe
D
$65
$55
$45
$35
ril y e
r r
ril y e
r r
ril y e
r r
r y e ly g p
p a
st
e er er ry ry
a
st
e er er ry ry
a
st
e er er ry ry
a
er er ry ry
July
p
p
gu be
b b
rch
rch
rch
a
July gu be
b b
a
July gu be
b b
a Ap
Ju Au Se Oct b b
A M
u
M
u
M
u
M Jun
Jun
A
A
ebrua M
Jun
ebrua M
Jun
ebrua M
ebrua
A ptem
Janua
A ptem
Janua
A ptem
Janua
Janua
e Octob
F
e Octob
F
e Octob
F
F
S
Novem Decem
S
Novem Decem
S
Novem Decem
Novem Decem
2008
2009
2010
2011
2012
Source: 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. 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 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 rose to $323 billion at an average price of $75
per barrel and accounted for 41% of the annual trade deficit. In 2011, at an average price of
imported energy of about $100 per barrel, the total cost of energy imports rose to $421 billion, or
about $100 billion more than the cost of energy imports in 2010.
Issues for Congress
The rise in the prices of energy imports experienced since early 2010 through May 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 experienced during the first half of 2011 could
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U.S. Trade Deficit and the Impact of Changing Oil Prices
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 Asia and other developing economies, have combined to push up the cost
of energy imports, which will have a slightly negative impact on the pace of the economic
recovery. The pace of economic growth, however, seems to have stalled during the second quarter
of 2011, which could have an important effect on both the levels of oil imports and on the price of
such imports if economic growth remains listless. Typically, energy import prices have followed a
cyclical pattern as energy prices rose in the 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 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 through the first half of
2011 and was a major factor in rising oil 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 over the long term 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 government’s 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.
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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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