If you want to make a dent in the U.S. trade deficit, the multi-billion dollar amount by which imports exceed exports, you could contract the whole national economy: Recessions, for all the pain they cause, can help bring trade deficits in balance by reducing the amount of foreign goods purchased.
Or, you could make a concerted effort to reduce oil imports, a major component of the trade deficit in good times and bad. The U.S. trade deficit, now more than $30 billion, is not necessarily the biggest problem associated with our dependence on foreign oil. Nor is it the first thing that strapped consumers think of when they think about all the ways this prolonged economic downturn has hurt their own finances. But on a macro level, the gaping trade deficit is one more way that those massive volumes of imports hurt our economy.
The country recently got a glimpse of how reducing one single component of the trade deficit – oil – could make a huge difference in the overall total. The Commerce Department reported an unexpected $3.5 billion decline in the trade deficit in August, reflecting … drum roll … a big drop in demand for foreign oil.
That’s the good news. The bad news is that demand didn’t drop because of a more robust domestic energy supply, but only because, after 21 months of recession, consumer confidence and overall spending power has been battered. People are buying less and traveling less and businesses have less freight to ship.
Shortly after the trade deficit posted such a large drop, the Dow Jones Industrial Average passed 10,000, crude oil prices moved above $75 a barrel and nationwide unemployment moved within spitting distance of 10%: A mixed bag of economic indicators, to say the least.
The recession is clearly not over for many Americans, but as more and more signs of a nascent recovery start to emerge, the country finds itself back at the same crossroad it has visited so many times in the past, with yet another opportunity to make meaningful changes in broad energy policy. It shouldn’t have to take the worst economic downturn since the great recession to achieve a big drop in oil imports. Hopefully next time, it won’t.
