Droppin’ Knowledge

U.S Trade Deficit is Half Oil

Calculated Risk

The Census Bureau reports: [T]otal September exports of $154.1 billion and imports of $198.1 billion resulted in a goods and services deficit of $44.0 billion, down from $46.5 billion in August, revised.

After trade bottomed in the first half of 2009, imports increased much faster than exports. Over the last five months, both exports and imports have been relatively flat.

The second graph shows the U.S. trade deficit, with through September. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The petroleum deficit decreased slightly in September, and the trade deficit with China decreased slightly (NSA).   Calculated Risk 

Yglesias, ThinkProgress.Org

A government official emphasized to me today what should be clear to anyone who follows Calculated Risk’s charts, namely that a huge element of our trade deficit has nothing to do with China or manufacturing but is instead driven by oil.

Now it’s not unusual that the US is a net oil importer. Most countries are. But America is a much more oil-dependent country than other places are. We have more anti-density regulations, more subsidization of big houses, less taxation of gasoline, less investment in mass transit, etc. than most developed countries. This isn’t really a coincidence.

The United States was a net oil exporter in the late-1940s. So we had a postwar industrial policy paradigm built around suburbanization and powerful firms in the oil and automobile sectors. The problem is that we’re not a net oil exporter anymore by a long shot. But we still have a policy paradigm build around encouraging lavish consumption of gasoline. Under the circumstances, we’d have to run a really enormous surplus in goods and services to cover the oil gap. Yglesias, ThinkProgress.Org

Hmm, well this makes sense. American oil exports have decreased and the only way for the deficit to get back into the green is to reduce subsidies for oil and begin to start creating subsidies and laws that favor the health sector, mass transit and green energy. Why? Because the majority of goods and services being exported are:  chemicals, medical equipment, capital goods, semiconductors and plastics. If America focused on these goods, the amount of exports will continue to rise and the trade deficit will reduce into a surplus.

Now, if only someone could inform Congress of this information, then the economy will finally begin to improve.