Falling U.S. petroleum imports have lowered the U.S. merchandise trade deficit by $250 billion from what it would have been otherwise, according to a report from IHS Markit.

IHS reports that the U.S. production boom has exerted a moderating force on what is a large domestic merchandise trade deficit by helping reduce the country’s net petroleum imports. Furthermore, U.S. production growth is now on track to make the country a net-exporter of petroleum for the first time since at least 1949.

Shale Boom Helped Lower U.S. Trade Deficit by $250 Billion: Report

Source: IHS Markit new report ‘Trading places: How the shale revolution has helped keep the US trade deficit in check’

Among the key findings:

  • The total US merchandise trade deficit in 2017 was nearly $250 billion lower than it otherwise would have been if the petroleum (crude oil, refined products and natural gas liquids) trade deficit had remained at its 2007 level
  • IHS Markit projects that the U.S. petroleum trade balance will further improve by roughly $50 billion between 2017 and 2022
  • IHS Markit estimates that the U.S. petroleum trade deficit in dollars fell from about $320 billion in 2007 to about $75 billion in 2017 as net imports declined; at the same time, the trade deficit for non-petroleum merchandise grew substantially
  • The continued growth of U.S. crude oil and NGL production, along with relatively flat liquids demand, are expected to make the US a net-petroleum (crude oil, refined products and natural gas liquids) exporter by early next decade. This would be the first time since at least 1949 that the U.S. was not a net petroleum importer
  • The resurgence of US oil and gas production has already altered the domestic net trade position of a number of energy products over 2007-2017 period; IHS Markit expects exports of several of these products to continue to rise
  • Although the country remains a net importer of crude oil, total U.S. petroleum net imports as a share of consumption have fallen from 60% in 2005 to 14% in first half 2018

New risk: will trade tensions with China become a barrier to the U.S. becoming a net petroleum exporter?

“For the United States, moving from net petroleum importer to net petroleum exporter would be a historic shift. Indeed, a further lessening in reliance on petroleum imports would also improve domestic energy security by moderating the impact of a large unexpected disruption of oil supply abroad on the availability of oil. Yet, even if the United States does become a net petroleum exporter, it will still be exposed to oil price swings—including those triggered by outages abroad—since oil is a globally traded commodity,” the IHS Markit report says.

“Of more immediate consequence, however, the potential for a further escalation in trade tensions between the United States and its trading partners—particularly China—introduces a new risk into global energy trade and energy demand. Trade wars could not only dampen trade in products along the energy value chain, but also damage the global economy and, in turn—and crucially—demand for the many hydrocarbon and chemical products that depend on world economic growth to spur gains in their consumption.”

Download the IHS Markit report in full here.


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