Oil prices push trade deficit to 13-month high

AP via Houston Chronicle ^ | June 10, 2008 | Associated Press

[thackney]

WASHINGTON — The trade deficit jumped to the highest level in 13 months in April as America's bill for foreign crude oil soared to an all-time high.

The Commerce Department reported today that the gap between what the nation imports and what it sells abroad rose by 7.8 percent to $60.9 billion, the largest imbalance since March 2007. The April deficit was $4.4 billion higher than the March imbalance of $56.5 billion.

The deterioration in the deficit was driven by a $4.3 billion increase in crude oil imports which jumped to a record $29.3 billion in April, as the average per barrel price rose to an all-time high of $96.81.

Oil imports are expected to climb further in coming months given that crude oil has continued its relentless rise and is now trading above $130 per barrel.

U.S. export sales totaled $155.5 billion in April, up 3.3 percent to an all-time high, reflecting big gains in sales of commercial aircraft, farm machinery, medical equipment and computers. But this increase was swamped by a 4.5 percent rise in imports, which also set a record at $216.4 billion, reflecting the huge increase in oil as well as big gains in imports of autos and consumer goods.

The deficit through the first four months of this year is running at an annual rate of $707.5 billion, up slightly from last year's deficit of $700.3 billion, which was a 7 percent drop from 2006. The improvement last year came after the trade imbalance set records for five consecutive years.

Many economists are looking for the deficit to shrink again this year as a sharp economic slowdown in the United States cuts into consumer demand for imports and the weak dollar helps to boost U.S. exports.

The Bush administration after tacitly accepting the decline in the dollar for years as a necessary ingredient to boost U.S. exports has switched signals. Officials are now talking about the need for a stronger dollar, a reflection of the pain being inflicted on Americans by high gasoline prices. While a weak dollar makes U.S. exports more competitive on overseas markets, oil producers demand higher prices for crude oil, which is priced in dollars.

Heading to a weeklong visit to Europe on Monday, President Bush said the administration would like to see the dollar strengthen in value. Treasury Secretary Henry Paulson pointedly said in a separate interview that the administration was taking no tools off the table that it might use to manage the dollar's value, including the use of government intervention to push the dollar's value higher. This administration has never intervened in currency markets in its seven years in office.

The politically sensitive deficit with China, which had fallen sharply in March, rose by 25.9 percent in April to $20.2 billion, reflecting higher imports of a wide range of Chinese products from cell phones to toys and games to televisions and other electrical appliances and clothing.

The United States and China will hold a fourth round of high-level talks on economic issues next week in Annapolis, Md., although there is little expectation of any breakthroughs on any of the various trade tensions that have been spawned by the surge in the deficit with China to all-time highs over the past several years.

The trade tensions with China have led to calls in Congress for adoption of punitive measures that would punish China for what critics see as unfair trade practices which have contributed to the loss of more than 3 million U.S. manufacturing jobs since 2001.

For April, the U.S. trade deficit with Canada, America's biggest trading partner, jumped by 18.6 percent to $7.6 billion, the highest level since January 2006.

The deficit with Mexico rose by 14.2 percent to $6.8 billion while the imbalance with the European Union increased 14 percent to $8.5 billion. The deficit with the Organization of Petroleum Exporting Countries rose 10.5 percent to an all-time high of $15.6 billion.

[kittymyrib]

Blame the enviro-nazis, their lapdog Democrats in Congress, and especially Bill Clinton for our dependence on our enemies for fuel. The clueless GOP should be running ads on TV every day hammering the fact home that had Billy Jeff not vetoed more drilling on federal land, we would be pumping over a million more barrels of domestic oil right now.

[mgc1122]

[avacado]

Decreased oil imports decreases the trade deficit which decreases the world market flooded with dollars which in turn strengthens the dollar which in turn lowers world wide crude oil prices due to a stronger dollar.

[Celerity]

This article must be wrong. We have a Democratic majority congress. no way this can be happening.

[thackney]

I like it!