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Shale Boom Slows Growth of US Trade Deficit

A surfeit of domestically-sourced crude is having a profound effect on the American trade balance, according to figures for 2014 just released. The WSJ reports:

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.

But the overall U.S. appetite for overseas goods didn’t diminish over the period, which started with the global economy’s first full year of expansion after the 2007-09 recession. Imports of just about everything else have surged as Americans substitute other goods for foreign oil, leaving a growing trade deficit.

“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.”

Our trade deficit increased last year in no small part due to a strengthening dollar, making imports relatively cheaper and exports less competitive abroad. That’s not great news for the U.S. economy, but it could be a whole lot worse, if not for shale.

The more oil we produce at home, the fewer petroleum products we need to import from abroad, and that’s undoubtedly a boon both for the American economy and for our energy security. Hail shale!

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  • Pete

    Question for ViaMeada:

    If shale reduces, if not eliminates, America’s dependence on foreign oil, would that incline to make America that more disinterested in the policing the world? I suspect that the answer is ‘yes.’

    • Kevin

      Maybe. But our 1940-1970 saw a relatively high US interest in policing the world. I suspect US interest in policing the world U.S. driven more by the perception if security threats from abroad and the capacity of out military to do something about them than economic dependencies.

      • Fat_Man

        Russia was a direct threat to the US and our NATO allies.

    • Fat_Man

      Only if the Persian Gulf is the world.

  • Fat_Man

    The continuing trade deficit is the flip side of foreign investment in dollar securities. Foreigners are buying dollar securities because the dollar has won the ugly dog contest over other currencies. Further, as low as American Interest rates are (1.96% for 10 year Treasuries) equally secure foreign issuers are offering less. Germany 0.37% and Japan 0.33% for their 10 years. The world is buying American securities, not American goods. This shows up on America’s books as a trade deficit.

    • FriendlyGoat

      We are probably winning the ugly dog contest because we’re seen as the big ugly dog, After all, we are getting away with it while amassing the greatest debt in the history of the world. But, the other dogs are smaller and uglier.

  • Jacksonian_Libertarian

    This is because of a deflating dollar which makes imports less expensive.

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