Friday, October 5, 2012
James K. Jackson
Specialist in International Trade and Finance
Petroleum prices rose sharply between January 2012 and May 2012, at times reaching more than $109 per barrel of crude oil. Although this is still below the $140 per barrel price reached in 2008, the rising cost of energy was one factor that helped to dampen the rate of growth in the economy during the second half of 2011 and the first half of 2012. While the price of oil was rising, the volume of oil imports, or the amount of oil imported, decreased slightly from the comparable period in the previous year. In general, market demand for oil remains highly resistant to changes in oil prices and reflects the unique nature of the demand for energy-related imports. In addition, sustained demand for crude oil in the face of higher prices reflected an increase in economic activity that occurred following the worst part of the economic recession in 2009. Turmoil in the Middle East was an important factor that caused petroleum prices to rise sharply in early 2011 and in 2012. Although prices for imported crude oil fluctuated somewhat throughout 2011, they averaged 30% higher than in 2010 and added about $100 billion to the total U.S. trade deficit in 2011. Oil futures markets in September 2012 indicated that oil traders expected prices to trend downward from the values reached in the summer of 2012 to around $90 per barrel by the end of 2012. The increase in energy import prices in 2011 pushed up the price of energy to consumers. In such cases, some elements of the public tend to pressure Congress to provide relief to households that are struggling to meet their current expenses. This report provides an estimate of the initial impact of the changing oil prices on the nation’s merchandise trade deficit.
Date of Report: September 12, 2012
Number of Pages: 12
Order Number: RS22204
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