If you have read any posts by Joe From Texas, you have probably picked up on the fact that he believes a thriving U.S. oil and gas industry is vitally important to the people of the United States. You are also aware that he thinks Joe Biden’s demonization of the industry is wrong. He has spoken about jobs the industry creates, the affordable energy it provides to American citizens, and the security that energy independence provides to our nation. However, one aspect that he has not examined until now, is the positive impact that the oil and gas industry has on U.S. trade with other countries.
Although economists disagree on whether trade deficits are good, bad, or don’t matter that much, Joe From Texas believes that it is generally better to have a trade surplus than a trade deficit. (Source: https://www.investopedia.com/articles/investing/051515/pros-cons-trade-deficit.asp)
In simple terms, a trade deficit occurs when a country, such as the U.S., imports more from other countries than it exports. Conversely, when exports exceed imports, a trade surplus occurs. The United States, at least for the last half century, has been operating with annual trade deficits.
According to the St. Louis Federal Reserve Bank, “from 1800-1870, the United States ran a trade deficit for all but three years, and the trade balance averaged about –2.2 percent of GDP. Then from 1870-1970, it ran persistent trade surpluses that averaged about 1.1 percent of GDP. Starting in about 1970, the United States began to run trade deficits again, which have continued to this day.” (Source: Historical U.S. Trade Deficits | St. Louis Fed (stlouisfed.org)
We often think of goods as being part of our trade deficit (we are all accustomed to seeing “Made In China” tags on goods in stores), but it is also true that services, including some offered within the U.S., are considered exports. According to the International Trade Administration, tourism, which is considered a service, plays a critical role in the U.S. economy. “Prior to the COVID-19 pandemic, in 2019, international visitors spent $233.5 billion experiencing the United States; injecting nearly $640 million a day into the U.S. economy. The U.S. travel and tourism industry generated $1.9 trillion in economic output; supporting 9.5 million American jobs and accounted for 2.9% of U.S. GDP. At 14.5% of international travel spending globally, international travelers spend more in the United States than any other country.” It should also be noted that, although the U.S. had an overall trade deficit in 2020, it actually had a $237 billion surplus in services. (Sources: https://www.trade.gov/travel-tourism-industry, https://world101.cfr.org/global-era-issues/trade/what-trade-deficit-means)
Although Joe From Texas appreciates the men and women who support the service industry and what they bring to our economy, he believes that producing goods at home is the key to the continued security and prosperity of the United States. If you stop and think about it, there are certain things that each of us can’t do without. Things such as food, medicines, and oil and gas to power our cars and the generation plants that provide electricity. The COVID-19 pandemic and the resulting supply chain disruptions demonstrated that we are far better off producing things at home and exporting our surplus, rather than relying on other countries to produce these products and import them to us.
This brings us to Joe Biden’s continued war on oil and gas and how this war plays into U.S. trade. Consider the following information: “In 2021, the United States shipped $1.754 trillion worth of goods around the globe. That dollar amount reflects a 13.4% increase since 2017 and a 23.1% acceleration from 2020 to 2021. America’s five biggest export products by value in 2021 were refined petroleum oils, crude oil, petroleum gases, cars, and electronic integrated circuits. In aggregate, those major exported goods accounted for 18.8% of overall exports sold by the United States. That relatively low percentage suggests a diversified range of exported goods, albeit 3 of America’s top exports are energy commodities.” (Source: https://www.worldstopexports.com/united-states-top-10-exports/)
A 2020 fact sheet distributed by the U.S. Department of Energy noted that the U.S. trade deficit, which in 2019 was the lowest deficit in six years at $616.8 billion, would have been $305 billion higher without domestic oil and natural gas production that year. In other words, if you took away oil and gas, rather than being the lowest trade deficit in six years, it would have represented a historic high in the trade deficit up to that point. (Sources: https://www.energy.gov/sites/prod/files/2020/10/f80/Economic%20Impact%20of%20Oil%20and%20Gas.pdf, https://www.cnbc.com/2020/02/05/us-trade-deficit-december-2019.html, https://www.epi.org/blog/u-s-trade-deficit-hits-record-high-in-2020-biden-administration-must-prioritize-rebuilding-domestic-manufacturing/)
The trend of oil and gas helping to lower our trade deficit has continued beyond 2019. According to the U.S. Energy Information Administration, in 2021 the United States exported about 8.54 million barrels per day (b/d) and imported about 8.47 million b/d of petroleum, making the United States an annual total petroleum net exporter for only the second year in a row since at least 1949. Think about it, we have an industry that is helping the U.S. with its trade deficit for the first time in over half a century, and the U.S. President decides to declare war on that same industry. (Source: https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php)
Despite export help from an oil and gas industry that he does not support, Joe Biden managed to run up a trade deficit of almost $1 trillion in 2022. Even the New York Times, which generally supports Biden and is certainly no lover of the oil and gas industry, had to admit that U.S. oil and gas was one of the few bright spots in U.S. trade numbers for 2022. “The weaker global economy weighed more heavily on trade at the end of last year, the data showed, as pandemic lockdowns in China and a war between Russia and Ukraine dampened demand globally. One exception has been the U.S. energy sector, which has stepped in to provide more natural gas and petroleum products after Europe cut ties with Russia.” (Source: https://www.spokesman.com/stories/2023/jan/26/us-trade-deficit-soared-last-year-nearing-1-trilli/)
We all know that Joe Biden’s war on oil and gas is rooted in the fact that he worships at the church of climate change. In case you don’t know where Joe From Texas stands on the climate change issue, you can read his thoughts in another post on this website. Although it is fair to say that he does not share Joe Biden’s views, it is also fair to say that he is open to alternative forms as energy once they are proven to be reliable. For example, if you examine what has happened in Germany, you will learn that so-called “green” energy may not yet be ready for prime time, as Joe Biden and many others in his church seem to believe. (Source: https://thefederalist.com/2022/06/21/germanys-green-energy-disaster-is-a-warning-to-the-united-states/)
The point that Joe From Texas makes is that it is insane to declare war on a proven, reliable source of energy that literally runs the engine of your economy when you don’t have a proven, reliable alternative that can take its place. To paraphrase an old saying, Joe From Texas believes the people of the U.S. “can chew bubble gum and walk at the same time.” By this, he means that we can and should continue production of the tried-and-true energy sources of oil and gas, while at the same time continuing to explore alternative energy sources and technology tied to those sources. Common sense demands that we take such an approach.
Joe From Texas heard about a gentleman in the energy industry in Louisiana who described our current situation pretty well. He said that contrary to popular terminology, we are not in an energy transition. Instead, we are actually in the midst of an energy addition. If you take the time to research all of the uses of petroleum and petroleum products, it is unreasonable to think these are ever going to completely be replaced.
