The Best Way to Close the Trade Deficit Is To End Our Oil Addiction

Posted by Ben Jervey

Plenty of commentators like to harp on about how our woeful trade deficit is the ultimate symptom of the sickness in our manufacturing industries. And while it's true that we're producing a lot less, and importing a lot more from China (amongst others), it's important to recognize that a pretty big chunk of that deficit has only to do with our appetite for oil.

Matt Yglesias highlights a chart from Calculated Risk that shows that roughly half of the U.S. trade deficit is in oil.

trade deficit, oil
 

Yglesias notes:

Now it’s not unusual that the US is a net oil importer. Most countries are. But America is a much more oil-dependent country than other places are. We have more anti-density regulations, more subsidization of big houses, less taxation of gasoline, less investment in mass transit, etc. than most developed countries. This isn’t really a coincidence. The United States was a net oil exporter in the late-1940s. So we had a postwar industrial policy paradigm built around suburbanization and powerful firms in the oil and automobile sectors. The problem is that we’re not a net oil exporter anymore by a long shot. But we still have a policy paradigm build around encouraging lavish consumption of gasoline. Under the circumstances, we’d have to run a really enormous surplus in goods and services to cover the oil gap.

It's really, really not that hard or painful for America to significantly cut it's oil consumption. Without digging up the relevant studies, I can confidently estimate that we could save 20 percent without anyone noticing a difference in lifestyle at all. This could be through increasing fuel efficiency standards alone, which ultimately would help Detroit, not hurt it.) Add in some savings in home heating energy through Home Star (which, remember, would save us 44 Deepwater Horizon spill's worth of oil) and then we're really talking.

Of course, policies like these would be all the more palatable to our elected officials on Capitol Hill if the discourse about trade deficit routinely included the fact that oil is half of the problem.