Business Monday

Oil imports remapping U.S. trade picture

ROBERTS
ROBERTS

The value of oil imported into the United States has fallen 48.01 percent through the first three months of 2015.

That is equal to $30.71 billion, a decline more than four times greater than the second-largest decline in the first quarter and almost 30 times as great as the third-largest.

There are pivot points in import-export trade flows, just as there are in life, personal relationships and other aspects of business. Pivot points, quite often, are easier to see once they have passed, once the impact of a direction change has become clear, rather than as we are living through them.

We are almost certainly passing through one right now in how the United States imports and exports. It has to do with oil, gasoline and all the related products surrounding the industry that drives so much of our economy.

We passed through a less pivotal one in 2013 when the value of cellphone imports surpassed computer imports. While less pivotal, it was not insignificant. It signaled a fundamental change in how we play, in particular, and how we work.

Larger scale

Energy is on a larger scale. The changes are evidenced by speculation and wide fluctuations in the price of oil, which are, in turn, influenced by new technologies in this country being used to extract domestic oil and natural gas previously thought beyond our reach.

As the import numbers change, they affect our trade deficit, can affect significant capital outlays for shipping lines and others, and can affect expensive airport and seaport infrastructure bets for taxpayers in key gateways. It can affect how the Federal Reserve, which makes decisions on interest rates, views our economy. Certainly most significantly, in this case, there are wide-ranging geo-political implications for the United States.

It’s not just oil, either. The second-largest decline referenced above, by the way — the one that was one-fourth the value of the drop in the value of oil imports — was to gasoline and other refined petroleum products. It has tumbled from being the No. 3-ranked U.S. import at this time last year to No. 8. The third-largest decline was in petroleum gases, often liquid natural gas, previously ranked No. 14 but No. 24 so far this year.

All three are energy-related and all three play into the price swings that are, at least in part, being led by hydraulic fracturing technology — fracking — in this country.

Consider this: Excluding those three imports, overall U.S. imports, rather than being down 1.58 percent this year, are actually up 6.47 percent. Without those three, the trade deficit, instead of being up slightly from this time in 2014, is greater than the record-setting year of 2006. Venture into the land of record deficits — a term that we haven’t had much use for most of this decade — and you start seeing different, more heated battles in Washington over trade policies.

Trajectory is clear

The data clearly show the trajectory of this pivot.

In 2004, oil became the top U.S. import into the United States, replacing motor vehicles. That year, the value of oil imports was the most ever for any import, at $136.03 billion. A decade later, in 2014, oil was still No. 1.

However, despite that No. 1 rank, for the third consecutive year, the value of oil imports dropped. The record was set in 2011 at $336.69 billion. In 2014, the total was 26.65 percent lower while overall U.S. imports had increased 6.22 percent in that time.

But the pivot is happening now. Through the first three months of 2015, oil has been dethroned. With that 48.01 percent decline, it now ranks No. 2, behind motor vehicle imports. Motor vehicle imports, despite the significant influx of auto manufacturers from Japan, Korea and Germany into the U.S. South to serve the American market, have risen six of the last seven years and are currently at a record pace.

Oil imports aren’t just falling in absolute value, either; they are also falling in relative value. The value of oil imports, which has accounted for more than 10 percent of the value of all U.S. imports since 2006, dropped to 6.17 percent in the first three months of this year. That is the lowest percentage in a first quarter for more than a decade.

Here in South Florida, oil is not a factor, but gasoline and other refined petroleum products are a key import, with the vast majority entering at Port Everglades. Through March, these imports into South Florida are down 21.81 percent, or $312.29 million.

There is a risk in looking just at the dollar value of imports and exports. Interestingly enough, gasoline imports by tonnage rather than value are actually up — both at Port Everglades and nationally. Just the price is down from the first quarter of last year. (That is not the case with oil, where tonnage is also down.)

Similarly, so are outbound shipments of gasoline — exports — up by weight, though not by value.

What it means

What this means, then, is that the United States is becoming more energy efficient from an export-import point of view. The United States now exports more refined petroleum products in both value and tonnage than it imports.

Because oil imports are largely restricted, we continue to have a large deficit, but there is a growing chorus of those who would like to open oil up to trade freely. While it has long been seen as a national defense and security strategy, these advocates of policy change argue it will actually lower prices.

Regardless of how that particular slice of the energy montage play out, we do seem to be at a pivot point in how oil and its refined version is traded in the United States, and the impact will likely be far reaching.

Ken Roberts is the founder and president of WorldCity, a Coral Gables-based company. He can be reached at kroberts@worldcityweb.com.

Top 15 U.S. imports, through first quarter

March 2015 YTD

1-Year

1-Year %

10-Year

10-Year %

Change

in rank

March

2015 YTD

Total, All Imports

$538,761,831,660

-$8,672,615,554

-1.58%

$158,178,137,613

41.56%

1

1

Motor vehicles

for transporting people

$37,557,668,056

$2,309,844,252

6.55%

$8,108,313,287

27.53%

-1

2

Oil

$33,253,359,951

-$30,707,567,633

-48.01%

-$3,855,453,750

-10.39%

1

3

Cellular, landline

phones, parts

$21,913,829,286

$3,484,242,962

18.91%

$17,947,932,728

452.56%

1

4

Computers

$17,343,887,913

$207,380,808

1.21%

$3,195,744,534

22.59%

1

5

Motor

vehicle parts

$15,623,491,285

$993,656,122

6.79%

$5,514,837,934

54.56%

2

6

Imports of

returned exports

$15,356,706,730

$2,626,895,486

20.64%

$7,561,410,859

97.00%

0

7

Medicine

$15,065,155,622

$2,056,487,078

15.81%

$8,014,769,850

113.68%

-5

8

Gasoline,

other fuels

$13,056,046,063

-$6,574,471,170

-33.49%

$2,179,157,842

20.03%

0

9

Computer chips

$6,935,872,150

$216,814,690

3.23%

$1,644,647,494

31.08%

0

10

Diamonds,

not mounted

$5,787,862,572

$116,697,700

2.06%

$2,027,132,003

53.90%

1

11

Commercial

vehicles

$5,644,377,724

$652,505,216

13.07%

$1,747,274,686

44.84%

1

12

Seats, excluding

barber, dental

$5,459,989,836

$499,425,885

10.07%

$2,228,620,057

68.97%

2

13

Aircraft engines,

engine parts

$5,262,675,719

$382,048,047

7.83%

$2,647,305,723

101.22%

-3

14

TVs, computer

monitors

$5,023,467,723

-$521,615,522

-9.41%

$908,897,253

22.09%

1

15

Medical instruments

for surgeons,

dentists, vets

$4,925,364,737

$438,591,972

9.78%

$1,982,929,943

67.39%

SOURCE: WORLDCITY ANALYSIS OF U.S. CENSUS BUREAU DATA

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