Thursday, November 14, 2013

Half of the Trade Deficit in September was from Oil Imports. Is this good thing? Bad thing? Or is just "a thing"?

Below is a graph (which I modified for instructional purposes) from Calculated Risk.

It shows the MONTHLY status (deficit or surplus) in the trade of goods and services that the US has with the rest of the world. It does not include ALL items accounted for in the Current Account of the Balance of Payments, but most of it.  We would call this "Net Exports" in our GDP equation (C + I + G + N(x)).

The gap between the RED line and the Blue line represents the value of imported oil in a particular month (not inflation adjusted as far as I know).

This graph is useful in showing the significance of oil in international trade.  As you can see, in September the dollar value of oil imported into the US was approx $20 billion.  That accounts for about 50% of the trade deficit in September.  Yes, just one commodity albeit an important one.

This graph also gives a nice perspective as to how dependent we are on "foreign oil" at any particular time. For the most part that means Canada and Mexico where we get a majority of our imported oil.


Oil imports usually increase during good economic times and decrease during bad. The BLACK line generally shows this---trends up during recessions, down during non-recessionary period(s).

However, in the last couple of years it has trended up DURING the economic recovery from the Great Recession.  How can that be?

That is the question for you.  There could be multiple reasons. Any guesses??
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