Oil price plunge puts U.S. on track for trade surplus with OPEC

By Nathanial Gronewold | 06/22/2015 08:50 AM EDT

The United States may record an annual trade surplus with OPEC in 2015, after decades of posting nothing but deficits.

The United States may record an annual trade surplus with OPEC in 2015, after decades of posting nothing but deficits.

It’s a startling turn of events that can be tied directly to the shale oil boom, and the crude price plunge that is now challenging the oil and gas industry in the United States.

The United States has never run an annual surplus with the members of the Organization of the Petroleum Exporting Countries collectively as far back as numbers are available. The statistics have historically shown only persistently large and ever-expanding trade deficits from 1985 on, reflecting past U.S. dependence on imported oil from OPEC members.


But that trend stopped in 2011 and reversed, then gained momentum in the other direction in 2014. The Bureau of Economic Analysis (BEA) posted revised figures for U.S. international transactions Thursday. The updated statistics still show a trend away from deficits with OPEC and toward surpluses instead.

BEA economist Ed Dozier said the reason behind the reversal of fortunes is simple: The United States is importing a lot less from OPEC these days.

"The story for OPEC is that imports are decreasing," Dozier said. "Primarily industrial supplied materials, which is the category that includes petroleum. So that’s the story."

Dozier said that the shift from trade deficits with OPEC toward the other direction really accelerated in 2014. International crude oil prices began a steady decline that summer, made worse by OPEC’s decision in November to keep production high.

Exports to OPEC from the United States, both goods and services, have been consistent, showing no discernible changes, Dozier noted.

"Exports are fairly steady," he added. "They are not changing at the rate that imports are decreasing, so you’re seeing the balance as moving more toward a surplus from a deficit."

It’s this combination of lower volumes of oil imports and cheaper prices for that imported crude that seems to be driving the reversal in the trade statistics, he said.

Rising Canadian crude production could also be pushing Middle Eastern crude imports out of North America. For much of the period of the U.S. shale oil rush, falling crude imports into the United States affected mainly African OPEC members. Imports from Venezuela have also fallen as that nation has sought out alternative markets.

Making oil history

The historical data says the United States has had only two monthly trade surpluses with OPEC, in December 1997 and November 1998.

The goods trade deficit with OPEC peaked in 2008 to nearly $178 billion, more than half the value of the current trade deficit with China. That number plummeted during the financial crisis but recovered to about $126.7 billion in 2011. It’s been trending downward ever since.

Statistics published by the U.S. Census Bureau and BEA show generally improving terms of trade with OPEC from 2011 on, with deficits declining steadily.

Now, for the first few months of this year, the United States has been running a trade surplus with the OPEC bloc of nations. If the trend continues throughout the year, for 2015 the United States will have come out in the black in terms of trade with the world’s largest group of crude oil exporters.

Census Bureau statistician Maria Eisman said the numbers reflect an aggregate accounting collected at the nation’s ports and are not based on modeling or statistical sampling.

"We work very closely with U.S. Customs and Border Protection, and of course with Customs what they do is they man all of the ports for both imports and exports, airports, vessels, railways, all of that," Eisman explained. "All that information that they collect is sent to us."

University of Houston petroleum historian Joseph Pratt expressed skepticism that the United States would end 2015 on the positive side of trade with OPEC.

"It would surprise me if the U.S. will soon have a trade surplus with OPEC, but I have never had a reason to look hard at trade data," Pratt said in an email.

The Census Bureau reports a first-quarter surplus in goods trade with OPEC for this year of around $750.5 million. For the first four months of the year, the balance of trade is estimated to have been about $744 million in goods. Census cautions that those figures are on a nominal basis and are not seasonally adjusted.

Seasonally adjusted revisions posted by BEA on Thursday still show a dramatic swing in the terms of trade. For fourth quarter 2014, the bureau saw a goods trade deficit with OPEC of more than $6.8 billion. For the first quarter of 2015, that figure had shifted to a surplus of $758 million in goods.

The numbers are much more lopsided to the United States’ favor when services are included. On a balance of payments basis, BEA reports a first quarter 2015 goods-and-services trade surplus with OPEC of about $6.2 billion, reported on June 3.

This dramatic turnaround has not gone unnoticed by federal government statisticians.

"The balance with OPEC countries shifted from a deficit of $1.5 billion to a surplus of $6.2 billion in the first quarter," BEA analysts note. "Exports decreased $1.1 billion to $27.1 billion and imports decreased $8.9 billion to $20.9 billion."

Price drop propels trend

Though lower volumes of imported crude have been driving the longer trend from 2011 on, the steep drop in the value of imported barrels seems behind the most recent quick swing from deficit to surplus from the end of last year to the first quarter of this year.

Eisman pointed EnergyWire to the Census’ latest FT 900 report, Exhibit 17. The data shows no huge shift in the volume of crude imported during the first four months of 2015 versus the same period in 2014. But the value of those imports is now much lower. This is because of the price per barrel that Census used to calculate the figures has dropped significantly, from a range of about $90 to $95 per barrel in 2014 to a range of $59 to $46 a barrel so far this year.

The goods trade deficit with OPEC began 2014 at more than $20 billion, then fell lower with each subsequent quarter.

If trade with OPEC is turning more beneficial for the United States, then there are likely multiple factors behind the shift, Pratt said. These include lower import volumes and a shift of oil imports toward more non-OPEC sources, changes in the U.S. domestic market brought about by shale oil and "the adjustment of global oil markets in response to the shale revolution, with OPEC seeking other markets."

Trade between the United States and Saudi Arabia has also improved for the United States during the first quarter. BEA said the United States saw a $1.4 billion goods-and-services surplus in trading with the kingdom.

The United States even ran a trade surplus during the first quarter with Canada, the nation’s largest source of imported oil, to the tune of approximately $2.9 billion. That shift is almost certainly a consequence of lower prices for Canadian crude imports.

Trend holds, for now

The situation could reverse again should crude oil prices appreciate this year, raising the value of imports from OPEC. But Dozier at BEA, while declining to predict the future in any way, said that the overarching trend toward surplus seems to be holding from month to month.

For U.S. exports of petroleum products, the data show a net decline compared to the end of 2014 in value. BEA says that U.S. exports of refined products were lower in the first quarter this year than in the final three months of 2014, contributing to a general decline in the value of U.S. exports of goods.

"The decrease in industrial supplies and materials was primarily due to a decrease in petroleum and products," the agency said in a release.

It is still unknown whether higher volumes of domestic oil production combined with growing exports of refined products and natural gas will have any meaningful effect on the United States’ massive trade deficit for the foreseeable future. Recent data suggests not.

Overall U.S. exports rose last year, but imports grew at a faster pace. The effect of the new energy renaissance on the nation’s larger overall balance of trade with the world as a whole appears so far to be negligible (EnergyWire, Feb. 23).

Census data shows annual U.S. trade deficits expanding during the shale gas and shale oil years. Last year, the gap in goods trade increased by around $35 billion to a deficit of more than $736 billion. The combined goods-and-services trade gap for 2014 was more than $500 billion.