Recycling Oil Revenue

Michael Fosco and Thomas Klitgaard

No 20180514, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Almost half the U.S. merchandise trade deficit was tied to petroleum ten years ago. Oil prices were above $100 a barrel, the economy was doing well enough that oil consumption was growing despite high oil prices, and domestic oil production was falling. The U.S. petroleum trade balance has since narrowed substantially from $400 billion in 2008 to under $65 billion in 2017 as a result of lower oil prices, higher domestic production, and a prolonged period of flat-to-falling petroleum consumption. Going forward, the changes in domestic production and consumption have significantly moderated the impact of oil prices on the petroleum trade deficit. That is, changes in oil prices are increasingly redirecting income between domestic consumers and producers rather than between U.S. consumers and foreign oil producers.

Keywords: oil; petroleum; trade balance; imports; exports; consumption; production (search for similar items in EconPapers)
JEL-codes: E2 (search for similar items in EconPapers)
Date: 2018-05-14
New Economics Papers: this item is included in nep-ene and nep-mac
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