Oil Prices Driving Near Record Trade Deficit

At nearly every opportunity of late, the Obama Administration tries to reiterate its commitment to trade and goal to double exporting levels by 2015. Unfortunately, those efforts appear to be doing little to stem the tide of a trade gap increasingly beholden to volatile commodity prices that again reared their ugly heads in May.

Little could be done to put a positive spin on the trade statistics for May, unveiled Tuesday by the Commerce Department: the trade deficit increased as a near-record $225.1 billion in imports was logged in May compared to exporting $174.9 billion, and the $50.2 billion deficit stands as the second worst on record. Exporting of goods actually decreased by $1.4 billion in the month, while importing of goods jumped by $5.3 billion. And the small exporting increase on the services side ($0.4 billion) was largely erased by the services’ imports uptick ($0.3 billion).

The key driver of the widening deficit for the month was high oil/fuel/petroleum-based product prices. The surge in said prices was felt by nearly every U.S. industry. In fact, Commerce Department statistics illustrate that the U.S. trade deficit to OPEC alone rose to $11.3 billion from the previous month’s $9.6 billion. It was the second largest increase behind that of China, which rose to $25 billion from $21.6 billion in April.

However, one somewhat positive point is that some tightening in the deficit could be expected for June or July, as oil/petroleum prices eased considerably as the U.S. summer began. In addition, the United States maintained trade surpluses with the likes of Hong Kong and Australia while lowering its deficits or keeping stable with levels with key trade partners in Germany, Japan, Ireland and Nigeria, according to Commerce department states.

(For full Commerce Department trade statistics for May 2011, click here.

Brian Shappell, NACM staff writer