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High Oil Prices Offsetting Strong Eports due to Weak Dollar

One of the only benefits to having a weak dollar (increased exports/decreased trade imbalance) is being wiped out by high cost of oil.

• Trade Deficit -- Department of Commerce2; Briefing.com3

Trade Gap Grows as Oil
Costs Offset Export Strength
By GREG ROBB
March 12, 2008; Page A2

The U.S. trade deficit widened slightly in January as strong American exports were more than offset by higher prices for imported oil.

The nation's trade gap for the month rose to $58.2 billion from a revised $57.9 billion in December, the Commerce Department said. Excluding petroleum, the trade deficit narrowed sharply.

Global Insight economist Nigel Gault, who believes that the economy is in a recession, said that the downturn would be worse if it weren't for exports. "The bottom line is that trade continues to be a huge support for the U.S. economy, dampening the recession," he said in a note to clients. Meanwhile, he said, the slowdown in consumer spending is resulting in lower imports.

Despite the larger deficit in January, economists expect the relatively strong trade performance to contribute positively to the first quarter's gross domestic product and partly offset other weakness in the U.S. economy. After the trade report was issued yesterday, Morgan Stanley said it expected first-quarter output to fall 0.2%, rather than to decline 0.3%, as it had predicted earlier.

January exports rose 1.6% to $148.2 billion from December, while imports rose 1.3% to $206.4 billion. Exports were strong as the weak dollar boosted sales of food, industrial supplies and consumer goods.

Imports rose due to higher prices and volume for imported oil, although a slight rise in auto imports also contributed. Sluggish demand continued to restrain nonenergy imports. Imports of goods alone rose 1.4% in January to $173.3 billion, while exports of goods rose 1.6% to $104.5 billion.

"The weaker dollar and strength of foreign demand is helping to boost U.S. exports," UniCredit analyst Roger Kubarych said in a note to clients. "But January's figures are best viewed as signifying a mounting concern about the ability and willingness of U.S. consumers to maintain consumption levels."

The politically sensitive U.S. deficit with China was $20.31 billion, up from December's $18.79 billion. The deficit with Japan held steady at $6.59 billion.

The imported value of crude oil hit a record $39.5 billion in January, as the average price per barrel of crude reached a new record of $84.09. With oil above $100 and moving higher, the oil deficit is expected to continue widening in coming months.

The U.S. imported 322.2 million barrels of crude oil in January, equating to 10.4 million barrels a day, up from 300.8 million barrels, or 9.7 million a day, in December.

By tejasmarcos on 2008-03-12 06:23:30 in Off Topic.

tejasmarcos says on Wednesday March 12th, 2008 6:23:

that sucks...

god is in your head

LDW says on Wednesday March 12th, 2008 8:44:

The US trade gap would pretty much disappear if the Americans would make development of their shale oil reserves a national priority.

Those reserves are huge................several times the rest of the world's reserves put together.

tejasmarcos says on Wednesday March 12th, 2008 9:56:

i have never heard that b4. can you back that with evidence perhaps?

god is in your head

LDW says on Friday March 14th, 2008 8:49:

Just google it.

Shale oil is extremely difficult and expensive to extract with the technology currently available. It is even more expensive to extract than oil from the tar sands in Alberta, which reserves are also several times what Saudi reserves are, to say nothing of the huge tar sands deposits in Saskatchewan, whose development is in its infancy still.

My understanding is that shale oil deposits in the US are several times even what the tar sands are.

The biggest problem, as I understand it, is that exploitation of shale oil requires large amounts of water, and much of the shale oil is located in parts of the US where water is not that plentiful.

LDW says on Friday March 14th, 2008 9:56:

Here is a link....according to Wikipedia, US reserves are about 62% of the total of 3 trillion barrels worldwide.

http://en.wikipedia.org/wiki/Oil_shale#Reserves

tejasmarcos says on Friday March 14th, 2008 13:38:

you know, LDW, they are doing alot of "fracking" in my neighborhood in fort worth, but i think they are drilling for natural gas. there are frickin dereks all over the place in north fort worth for this purpose.

god is in your head

LDW says on Friday March 14th, 2008 14:15:

yes....Tejas...I know some people in Texas who are in the oil and gas (or related ) business, and that is my information too.

What you are looking at is probably natural gas.

I am no expert, but as I understand the required logistics for shale oil extraction, they bear more similarities to those required for tar sands than for conventional oil..........but then I could be mistaken.

tejasmarcos says on Sunday March 16th, 2008 19:14:

good info. the truth was right under my nose (literally) and i never knew about it. thanks for the enlightenment, ldw.

god is in your head