Trading places: How the shale revolution has helped keep the US trade deficit in check

Falling US petroleum imports have lowered the US merchandise trade deficit by $250 billion from what it would have been otherwise

A new IHS Markit report examines the impact of rising US oil, natural gas and chemicals production on the domestic trade merchandise balance and how the US position in energy and chemicals may evolve in coming years.

The report finds that the US 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, US production growth is now on track to make the country a net-exporter of petroleum for the first time since at least 1949.

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 - petroleum liquids separated out from natural gas and also known as NGLs) trade deficit had remained at its 2007 level
  • IHS Markit projects that the US petroleum trade balance will further improve by roughly $50 billion between 2017 and 2022.
  • IHS Markit estimates that the US 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 US 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 US 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

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