Oil Boom: How America Saved $175 Billion a Year

America's oil boom is no longer a secret. But the impact it will have on the economy still isn't clear. Low gas prices haven't arrived. A manufacturing boom remains elusive.

But there's one area we can measure the impact of our energy boom with precision: The trade deficit. And the numbers are staggering.

Let's take a look.

America became a consistent net exporter of finished petroleum products in 2011 for the first time in half a century:

Source: Energy Information Agency.

Now, this only represents finished petroleum products like gasoline and diesel. Foreign countries like Mexico have a voracious appetite for our finished petroleum given their lack of refinery capacity. America still imports crude oil. But our reliance on oil imports is shrinking fast, nearing the lowest level in two decades:

Source: Energy Information Agency.

In June, 2008 America imported some 300 million barrels of crude. In June of this year, that figure was a quarter lower, at 231 million barrels. That's simply huge. 

Put our dwindling reliance of imported oil together with a booming export market for finished petroleum products, and you get a remarkable statistic: U.S. net imports of crude and petroleum products are back to where they were nearly 30 years ago:

Source: Energy Information Agency.

In June 2008 America imported a net 11.2 million barrels of crude and petroleum products per day; this June, it was down to 6.2 million barrels. That's a difference of five million barrels per day, or 1.8 billion barrels per year.

Slap a dollar amount on that figure, and you're talking real money. Energy analyst Daniel Yergin wrote last year:

The increase in domestic oil production over the past five years will reduce our oil-import bill this year by about $75 billion. The growth of shale gas will save the U.S. from spending $100 billion a year on imported [liquefied natural gas], which was the likely prospect five years ago.

$175 billion per year. And that was last year. The savings is almost certainly more this year, with lower crude imports and higher finished-product exports.

The end result: An oil boom equals a smaller trade deficit. The economy's overall trade deficit -- the amount our imports exceed exports -- has fallen by half since 2008, to 3% of GDP from nearly 6%:

Bureau of Economic Research.

A decade ago, Warren Buffett worried about our growing trade deficit and told Fortune magazine:

In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than we produce--that's the trade deficit--we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.

We're still selling off the farm, but much less than before, and much less than nearly anyone expected just a few years ago.

Analysts trying to figure out how to benefit from America's energy boom tend to zero in on specific companies. Cheniere Energy (NYSE: LNG) has an opportunity in liquefied natural gas exports, Devon (NYSE: DVN  ) in fracking. But the biggest beneficiary may be the economy at large -- you, me, everyone. We now live in an economy less reliant on strangers for energy than we have in over a decade. There is a rebuttal to rejoicing over this; some say imported oil is our friend. But as Buffett worried a decade ago, an ever-expanding trade deficit meant "we have entered the world of negative compounding -- goodbye pleasure, hello pain." That pain is quickly turning into a pinch. 

Interested in more on the economy? My new report, "Everything You Need to Know About the National Debt," walks you through with step-by-step explanations about how the government spends your money, where it gets tax revenue from, the future of spending, and what a $16 trillion debt means for our future. Click here to read it. It's free. 


Read/Post Comments (1) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 04, 2013, at 4:27 PM, plange01 wrote:

    giving america access to oil is worse than giving a child dynamite! corruption and speculation has already pushed prices to their highest levels in years.unless these speculators and other trash can be stopped its probably better to just stop drilling

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2618828, ~/Articles/ArticleHandler.aspx, 9/15/2014 12:19:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement