This week, the Commerce Department released its Annual Trade Highlights which found that the petroleum deficit in 2014 was at the lowest point since 2004. For those of you who may not be familiar, the “petroleum deficit” is the percentage of the U.S. trade deficit that is attributable to importing crude oil and refined petroleum products.
Driven principally by the United States’ energy renaissance, the Commerce Department also noted that 2014 marked a record high in the value of refined petroleum products (i.e. gasoline, diesel fuel, jet fuel etc.) exported from the U.S. to our trading partners around the world, accounting for nearly 10 percent ($146 billion) of the total value of all products exported from the U.S. last year.
So, what’s the good news? Well, America is becoming more energy secure through the increased production of our domestic oil and natural gas resources. As the Wall Street Journal noted this week, the domestic “Oil Boom a ‘Game-Changer’ on Trade Deficit”:
“The U.S. oil boom is redrawing America’s trade picture. Petroleum imports accounted for less than 20% of the nation’s trade deficit last year, down from more than 40% only five years earlier, according to figures for 2014 released Thursday… “If we hadn’t had this oil boom I think our deficit would be lot larger than it is right now,” said IHS Global Insight economist Patrick Newport. “It’s a game-changer.”
This is good news because we’re now able to reduce the volume of crude oil that we historically imported in greater quantities – which contributed to the trade deficit – and rely more on crude oil produced in places like North Dakota and Texas.
How does crude oil exports factor into this? As you may know, government policy allows for unfettered exports of gasoline, diesel fuel, jet fuel and other refined products; however, it prohibits domestically produced crude oil from being traded with our friends and allies around the world.
If Congress and/or President Obama were to repeal this policy, studies show that the trade deficit – and specifically the petroleum deficit – could narrow to the tune of billions of dollars per year while also putting downward pressure on the price consumers pay for gasoline at the pump and providing our trading partners with a reliable, stable and secure source of oil.
From ICF International:
“Lifting crude oil export restrictions contributes to expanded U.S. exports. This could narrow the U.S. trade deficit by $22.3 billion in 2020.”
In fact, the White House has recognized the impact domestic energy production can have on reducing the deficit. In a blog posted on the White House website on August 29, 2013, two of the president’s top economic advisors, Jason Furman and Gene Sperling, wrote:
“[T]he President’s focus on increasing America’s energy independence is not just a critical national security strategy, it is also part of an economic plan to create jobs, expand growth and cut the trade deficit.”
“We will shortly be at the point where domestic crude oil production exceeds imports on a sustained basis for the first time since the early 1990s. The increased domestic supply combined with increased oil efficiency of the economy reduces vulnerability to global supply disruptions and price shocks, enhancing our national security.”
Others have weighed in on the debate as well:
Narrowing our trade deficit benefits all Americans, and lifting the crude oil export ban would ensure that we experience the positive economic effects for generations to come.