Excluding Oil, The US Trade Deficit Has Never Been Worse

Tyler Durden's picture




 

Remember when in January 2010 Obama promised that he should double US exports in five years in a bid to collapse the US trade deficit? Not only that, but in his 2010 SOTU address, Obama doubled down by saying "It’s time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America."

Back then, Jennifer R. Psaki who was still a simple White House spokesperson, said that the White House "had been working for several months on a policy to increase exports. She said the plans included the creation of an export promotion cabinet and steps to help small and medium-size businesses tap markets in other countries. "

Well, it isn't quite five years later (he still has six months), but we doubt that anyone would have expected what the outcome of Obama's export boosting campaign would be. We show it below in the following chart which captures the US trade deficit, excluding oil.

 

What this chart shows is that when it comes to core manufacturing and service trade, that which excludes petroleum, the US trade deficit hit some $49 billion dollars in the month of May, the highest real trade deficit ever recorded!

In other words, far from doubling US exports, Obama is on pace to make the export segment of the US economy the weakest it has ever been, leading to millions of export-producing jobs gone for ever (but fear not, they will be promptly replaced by part-time jobs). It also means that the collapse in Q1 GDP, much of which was driven by tumbling net exports, will continue as America appear largely unable to pull itself out of its international trade funk, much less doubling its exports.

What's perhaps just as bad, is that the chart above shows that global trade continues to collapse: just recall the near standstill in Chinese trade, both exports and imports, that took place earlier this year. We wonder: is the fact that the world is trading with each other at the slowest pace since the Lehman collapse also due to harsh winter weather?

Yet while core trade is the worst ever, overall US trade is not all that bad. Why? Because of the shale revolution of course, and the fact that net US petroleum imports have plunged.

 

Note, the above chart does not imply the US is a net exporter of petroleum, especially considering the recent news surrounding the easing of the oil export ban. That simply won't happen as was explained previously. What it does show is that oil imports as a percentage of the total US trade deficit continue to decline, even if the US still remains a net oil importer.  Which is curious because as Bloomberg reports, "the U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs...  U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries this year with daily output exceeding 11 million barrels in the first quarter, the bank said in a report today. The country became the world’s largest natural gas producer in 2010. The International Energy Agency said in June that the U.S. was the biggest producer of oil and natural gas liquids."

So even with the world's biggest crude production, the US still needs to import nearly $9 billion in petroleum goods every month? That is hardly enough to offset the massive loss of jobs experienced in other non-energy sectors of the economy which unlike oil, have never seen a worse trade deficit.

Furthermore, even as the energy sector soaks up some $200 billion in capex or some 20% of the total private fixed-structure spending, the US shale renaissance will only persist for another 5 or so years before the output rates peak and resume their downward direction:

U.S. oil output will surge to 13.1 million barrels a day in 2019 and plateau thereafter, according to the IEA, a Paris-based adviser to 29 nations. The country will lose its top-producer ranking at the start of the 2030s, the agency said in its World Energy Outlook in November.

Or sooner. Or later. The funny thing about petroleum production is how dependant on extraction technology it is. Still, while the shale revolution has been a blessing since the Lehman collapse, it may be on the verge of some serious disappointments: recall back in March when the Monterey Shale, whose reserves were said to account for two-thirds of all recoverable US shale oil resources, saw the EIA cuts these estimates by a whopping 96% overnight!

Furthermore, as we also reported back in March, the US may well have hit the tipping ROI point, as shale costs have exploded in recent months. In fact, the one thing that may be masking the increasing unprofitability of shale production in the US is that old standby: debt. Some of the choice fragments from the indepth look at the shale industry, from Shale Boom Goes Bust As Costs Soar:

The U.S. shale patch is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground.

Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”

 

...

 

In a measure of the shale industry’s financial burden, debt hit $163.6 billion in the first quarter... companies including Forest Oil Corp. , Goodrich Petroleum Corp. and Quicksilver Resources Inc. racked up interest expense of more than 20 percent.

 

Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

But one doesn't need to look at the shale driller's balance sheets to know that something is afoot: a quick glimpse at recent Bakken shale dynamics, shows that the well efficiency has topped out and the only offset is the exponentially rising number of wells: an exponential line which as the excerpt above shows is only sustainable courtesy of ZIRP and ultra cheap debt. If and when the Fed's generosity ends, watch out as the shale day of reckoning finally arrives .

In any event, the above shale discussion is tangential - perhaps the US will uncover new technologies to tap even more oil, at lower prices and higher efficiencies. But probably not, as even the E&P industry is increasingly more focused on buybacks and cashing out here and now, than on capex and R&D spending.

Ironically, it is precisely the oil industry in general, and shale in particular, that Obama blasted as recently as 2011. As the NRO helps us recall, it was back in 2007, Obama said he wanted to free America from “the tyranny of oil.” In 2011, he called oil “yesterday’s energy.” He also decried the profits being made by the oil and gas sector and declared that it was time to repeal the tax preferences given to it (which cost taxpayers about $4 billion per year), calling them “oil-company giveaways.” How ironic is it, then, that it is precisely the oil companies which prevent the soaring US trade gap in all other goods and services to disintegrate the US economy completely.

In any event, in a world in which trade increasingly does not matter (because central banks supposedly can and will merely print "prosperity" to offset the lost wealth that comes with international trade and comparative advantage, a concept that has been around since the late 1700s), it is becoming clear that America has certainly adhered to the Fed's mission of forcing capital misallocation worse than ever, by focusing not on being competitive in an increasingly more technological and sophisticated world, but merely pretending that an economy can achieve escape velocity almost exclusively through stock buybacks.

And yet somehow there are those who still vouch for 3% GDP growth any minute now, a renaissance in capital spending also any minute now, just, well, never now, and who believe that some 285K jobs can be created at a time when the US economy is freefalling and the M&A bubble is laying off tens of thousands every month left and right all in the name of the almighty EPS beat.

But then again, Obama still has 6 months to make good on his promise to "double US exports in 5 years." We are confident that in retrospect, just like in all of his other public appearances, he will have spoken nothing but the truth...

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Fri, 07/04/2014 - 18:24 | 4925612 starman
starman's picture

America is the new Europe. 

Fri, 07/04/2014 - 18:26 | 4925616 International Jew
International Jew's picture

America is going to split.

Fri, 07/04/2014 - 19:07 | 4925669 Winston Churchill
Winston Churchill's picture

Your first sensible comment.Persevere.

It will indeed split,prolly into four or five countries.

Divide and conquer works both ways..

Fri, 07/04/2014 - 22:34 | 4925958 Kprime
Kprime's picture

oh no! you mean the south gonna rise again? 

Sat, 07/05/2014 - 04:37 | 4926171 Luckhasit
Luckhasit's picture

South, North, California, Texas, and the MidWest.

NAFTA. Coming to a city near you.

Sat, 07/05/2014 - 05:59 | 4926185 Headbanger
Headbanger's picture

I'm a little lat to the party here.  But the above article makes it even moar dire for the Federal Reserve to prop up the value of the U.S. dollar in order to avoid horrible inflation which would crush what's left of the U.S. GDP and thus make it impossible to afford U.S. global military dominance resulting in a major global war.

This is why we will soon see the Federal Reserve begin tightening along with severe cut backs in social programs and much higher taxes.

Expect the Federal Gasoline TAx to double soon as it's the easiest tax increase to pass cause it's "fair" to everybody even though it burdens the poor worse yet.

Same thing for tax on booze and even the federal tax on the rubber content of tires (didn't know about that one??).

And we are going into a really big war soon while we can still afford to fight one.

That is, unless we have our own Civil War II first.

In which case we can expect to be "invaded" by major foreign powers supporting different factions in our civil war just as England aided the Confederate States in the last one.

Sun, 07/06/2014 - 23:39 | 4930687 IronForge
IronForge's picture

Banger:

IMHO, the "Big War" is  already on the go with the 
1) NewAmericanCentury-takeover/sabotage-of-7NationsNotSoFriendlytoISR;
2) UKR-Land/Resource/Pipeline-Grab/NATO-Missile-Base-Installation;
3) Asia Pivot-and-Provocation

It's a matter of time until USA successfully provokes a Proxy of CHN, RUS, or other parties to find an excuse to continue the War Parties.

Also, I don't think TEAM_USA's USD Scheme will collapse too rapidly due to the:

1) Petroligarchs (7 Sisters' Children) still having a good share of (Domestic and Foreign) Oil producing assets under influence/control to sustain US Domestic Consumption, Industrial Production, and Military Operations for some time. Worse Case Scenario, they'll find an excuse (e.g., from "I.S.", Iran, etc., to effectively take over an Petrol-rich Country or two - like SAU or IRN).

2) CHN, JPN, and GBR holding USD-based Assets from exporting to the US. At least CHN and JPN have suppressed/debased their Currency Valuations to support their own GDP; and current policy is to prop up the USD. They can effectively trade off USD for Oil for a while.

They can't force the World to Trade only in USD for Oil anymore; but it'll take awhile for the World to rid itself of excess USDs.

Sat, 07/05/2014 - 11:09 | 4926452 MontgomeryScott
MontgomeryScott's picture

NO HYPERBOLE here.

There is a planned 10-region breakup in progress. This has been going on since the inception of FEMA. The borders and 'capital cities' are well-established.

http://tinypic.com/view.php?pic=2itnev8&s=5#.U7gRiLHAOM8

or

http://wapainc.org/default/assets/Image/map_FEMA-Regional-Map-2.jpg

There is also a ten-region plan for the entire world, which is a work in progress.

http://3.bp.blogspot.com/-iOTN1wWi6jk/TV2m_i-QuoI/AAAAAAAAANw/KR0QHBogjl...

It's not going to be pretty.

Gradually, almost beneath notice, the world (and the United States) is being absorbed, while the population is busy focusing on the small pictures on the television that lie continuously. Like the frogs in the pot, the heat was being turned up slowly, and now the cook is going to turn the flame up higher.

The end will come quite suddenly, and by the time anyone has the balls to stand up, it WILL be too late. The unified military will be resisted, of course, and mop-up operations will last for years.

AGENDA 21. NAFTA isn't the issue; simply a small part.

Sat, 07/05/2014 - 00:38 | 4926056 SF beatnik
SF beatnik's picture

Regarding split, see Chittum's "Civil War II" 

Fri, 07/04/2014 - 19:15 | 4925684 Harbanger
Harbanger's picture

Maybe true, although I'm not sure what you mean, liberty exists by the Lords grace, anywhere on earth.  America is a battle ground.

Fri, 07/04/2014 - 18:30 | 4925624 knukles
knukles's picture

Oh yeah... now I remember.
One of Obie & Cie's promises was that he was gonna double exports ....

Now, where's my Chinese shit when I need it...  Damn channel changer's broke again right when Dancing with the Czars is coming on....

Fri, 07/04/2014 - 18:46 | 4925645 TeamDepends
TeamDepends's picture

"Double exports" in commiespeak means quadrupling the number of "undocumented immigrants".  Example:  Now you stop your whining, cross Mexico, and when you reach the land of handouts cry like a pussy so they will allow us in.

Fri, 07/04/2014 - 20:43 | 4925833 TeamDepends
TeamDepends's picture

What happened to the top half of this thread?

Fri, 07/04/2014 - 20:06 | 4925777 CrashisOptimistic
CrashisOptimistic's picture

Okay.

First of all, Crude Plus Liquids from Natural Gas is not a measure of oil.  It's a measure of All Liquids.  Liquids from natural gas do not push trucks around.  Crude/diesel does.  There is no diesel, jet fuel or transportation fuel in general in "liquids from natural gas".  That stuff makes plastic.  It doesn't feed you.

So this 11 million bpd is bullshit.  US crude production is about 8.  And we import about 7 or 8 mbpd.

Yes, we export "petroleum products" but that is not coming (largely) from US crude BECAUSE WE IMPORT 7 or 8 mbpd.  Venezuela sends Houston some of its thick oil that they cannot refine locally and Houston sends them back diesel and gasoline -- and this is a "petroleum export" but it didn't come from some magic US oil source.  The volumetric gain is also bizarrely recorded as "US oil production" aka "refinery gain".

The sheer amount of bullshit being spread to try to justify optimism for November is mind boggling.

 

Fri, 07/04/2014 - 23:47 | 4926022 disabledvet
disabledvet's picture

Natural gas is...er....now WAS so cheap...we weren't just able to export these fuels from oil rich Venezuela back to them...but from pretty much everyone back to them.

No mention about the massive flaring going on in North Dakota et al either. "Talk about a carbon footprint." About the size of a Brontasaurus fart.

"Ten million down just to trade oil futures." No way that market isn't measured down to the last drop in your tank. To my knowledge only the USA, Great Britain and Canada can even afford to HAVE non-state oil companies. Every other country on earth has nationalized their oil industry.

That says to me a bias towards production and problems of over capacity...but so far the cartel has screwed us Royally.

So far Tesla has not collapsed both the gasoline and ICE complex.
(That would be simultaneously I might add.) the Nissan Leaf is getting a big upgrade however and if the these "supercharger stations" suddenly start popping up everywhere guess what..."free fuel for life."

There's probably enough juice in a Tesla car battery itself to provide all the electricity you would need in a modest home (1200 sq feet) that is run efficiently. "Free fuel for your house too!"

Sat, 07/05/2014 - 08:39 | 4926283 fattail
fattail's picture

Within the last 2 months two new Super Charger stations on I-70 about 150 miles apart and they are in the middle of no where.

Sat, 07/05/2014 - 00:45 | 4926066 SF beatnik
SF beatnik's picture

Next time you drive down the street, think of all the diesel fuel and asphalt needed to maintain it. Think of all the other roads in the US. And in Europe. Thing of the sewer pipes, water lines, electrical lines underneath. And then consider that with $4 gasoline, the roads are more crowded with cars than ever before. 

 

WE ARE TOTALLY FUCKED. 

 

It might take a year or two or three for this to become painfully obvious. 

Sat, 07/05/2014 - 08:37 | 4926281 fattail
fattail's picture

While I agree we are fucked, the roads arenot as crowded as they were in 2007.

http://www.advisorperspectives.com/dshort/updates/DOT-Miles-Driven.php

Sat, 07/05/2014 - 10:28 | 4926389 wrs1
wrs1's picture

Actually the shale oil is light crude it's not NGL's.  You should get your facts straight.  

Fri, 07/04/2014 - 18:38 | 4925628 Ignatius
Ignatius's picture

Such clear evidence that the elite rulers of the US care nothing about the long term prospects of the country of the USA, and by their actions hardly give a rip about the rest of the world either.

Amoral and stupid selfishness or a venal grand design?  Evidence exists for both.

 

Fri, 07/04/2014 - 18:44 | 4925642 yogibear
yogibear's picture

The US is just another country the elite can financially rape. Why any 18 year old would fight their war(s) is being just plain naive. 

Fri, 07/04/2014 - 19:21 | 4925692 International Jew
International Jew's picture

Kinda wish that the game total war would more accurately reflect the impact of a trade deficit. Although, I will note that almost no country agrees to trade relations if it is in deficit, at least on expert mode.

 

A trade deficit is, as ross perot warned, 'a giant sucking sound going south'

Sat, 07/05/2014 - 08:42 | 4926286 fattail
fattail's picture

Hey now, think like an 18 year old.  Its a full time job, so they can quit their 2 part time jobs.  They get paid to workout and shoot guns.  Oh, and there is lots of travel.  What is not to like.  If they stick with it for 20 years there is a sweet retirement package.

Fri, 07/04/2014 - 18:48 | 4925647 I Write Code
I Write Code's picture

That's balance, not exports, though I assume it nets out about the same.

If you like your trade deficit you can keep your trade deficit.

Anyway the Fed has to keep exporting those cyber-dollars, they are crack to the world economy.

Fri, 07/04/2014 - 18:51 | 4925650 NoWayJose
NoWayJose's picture

Simple solution - 'give' $49 billion in dollars each month to various 'rebels' and then export US made weapons to them.

Fri, 07/04/2014 - 23:55 | 4926026 disabledvet
disabledvet's picture

I dunno. Hard to compete with that 99 dollar Chinese made assault rifle.

Mine is a "paratrooper addition"...quite nice actually. If every human on the planet were required to own a gun that might put a debt in that trade deficit thingy. Perhaps We the People need to table a resolution at the UN for said "International Mandate"? That second Amendment sure seems in full force in Ukraine, Syria, Iraq and Afghanistan right now.

Sat, 07/05/2014 - 08:44 | 4926291 fattail
fattail's picture

I thought we were doing that already.

Fri, 07/04/2014 - 19:00 | 4925659 Vendetta
Vendetta's picture

What a fucking surprise

Fri, 07/04/2014 - 19:10 | 4925676 deflator
deflator's picture

You don't even have too exclude oil, just look at the jobs data. All the jobs added excluding part time are(in some way) government jobs. Government jobs are added to GDP but actually add to trade deficits.

Fri, 07/04/2014 - 19:29 | 4925705 International Jew
International Jew's picture

very good point. 

Fri, 07/04/2014 - 20:33 | 4925817 Escrava Isaura
Escrava Isaura's picture

Deflator…

Good point! US have been a nanny state since 1783 [The American Revolution].

Google Shay’s Rebellion... The beginning is all there.

Fri, 07/04/2014 - 20:35 | 4925818 Escrava Isaura
Escrava Isaura's picture

Double post! Not sure how it happened.

Fri, 07/04/2014 - 21:33 | 4925880 deflator
deflator's picture

 Nanny state since civil war when money was centralized among those that thought that they had civil liberties to take what they wanted by force.(as long as government gots their back) Centralized government(will eventually) proved them otherwise and instituted a paper dollar for us to use. ughh.

Sat, 07/05/2014 - 00:04 | 4926029 disabledvet
disabledvet's picture

I think the problem is Too Big to Fail actually. We never had that in the 1930's. It's ridiculous to even call it Capitalism actually.

All this is is inflation by another name. The constant meme had been "you can't solve a debt problem by creating more debt"...but in fact you can...provided the currency is well nigh worthless. "The bank won't have a problem rolling over the debt then." the reset in interest rates is always higher.

Of course "if Wall Street is in a huge bubble...

Fri, 07/04/2014 - 19:29 | 4925708 topshelfstuff
topshelfstuff's picture

...and should continue to grow, since we ain't paying anyhow

so anyone willing to sell us stuff, we're buyers and taking all you want to give

Fri, 07/04/2014 - 20:15 | 4925797 Greenskeeper_Carl
Greenskeeper_Carl's picture

That's what's always fascinated me since I figured out the way out financial system works(kinda, at least). People are willing to give us real things, valuable commodities like oil, in exchange of dollars that are created out of thin air. The fed has created trillions of these dollars out of thin air, which are really just instruments of debt, and flooded the world with them, and people still are willing to give us things for them. So, in essence, all we really export is debt and inflation

Fri, 07/04/2014 - 20:30 | 4925814 NoPension
NoPension's picture

Kinda like my wife. As long as she has checks.......

And I get stuck covering.

Fri, 07/04/2014 - 21:18 | 4925876 Escrava Isaura
Escrava Isaura's picture

Greenskeeper_Carl....

You’ll appreciate the link below. It doesn't get any better than that:

http://www.zerohedge.com/news/2014-07-02/china-golden-age-central-banker...


Fri, 07/04/2014 - 22:09 | 4925937 Redhotfill
Redhotfill's picture

The trouble with those dollars that come from thin air is, eventually when they wont buy anything the people who gave real goods for them get mad, ... really really mad,  and then they want their stuff BACK!

Sat, 07/05/2014 - 07:12 | 4926214 ltsgt1
ltsgt1's picture

I recently figured it out that our dollar is not back by our GDP. It's back by the GDP of the rest of the world. As long as nations continue to utilize dollar to conduct trades, dollar will maintain its value. That is why we protect countries which support the dollar and punish those which strayed from it.

The problem we are facing is that Europe doesn't need our protection from the Russian bear any more. Chinese never needed our protection but we have pretty much taught them everything they need to know and they don't need us any more.

I have no idea how much longer can we maintain the petrol dollar status. If I were the Saudis, I'd consider selling my oil in euro, yuan and ruble since America has been projecting nothing but weakness rather than power. Why should I support a foreign currency which offer me no protection?

Fri, 07/04/2014 - 21:09 | 4925868 Last of the Mid...
Last of the Middle Class's picture

And my favorite of all: Manufacturing is making a comeback in the U.S.   Bwwwaaaaaaaa

Sat, 07/05/2014 - 01:49 | 4926110 LostandFound
LostandFound's picture

So China is winning the currency wars and the cost per barrel needs to increase considerably so that Shale extraction can be deemed a viable long term strategy? Clearly nothing to do with the potential wars in the middle east. 

Sat, 07/05/2014 - 06:27 | 4926194 AdvancingTime
AdvancingTime's picture

America imports around five hundred billion dollars more from other countries every year than they export. This means we have a giant trade deficit, when we add this to our massive government deficit it is easy to see that we are living far beyond our means.

The Fed has been superbly entrepreneurial when it comes to Ponzi schemes or pseudo-economics hocus-pocus that has allowed the current situation to develop. The Fed  must at some point begin to ponder a real exit strategy and end the massive and corrosive stimulus that the economy has come to expect. To make matters worse little has been done to address our structural problems and make America more competitive, this will thwart growth going forward. More on this subject in the article below.

 http://brucewilds.blogspot.com/2014/06/exit-strategy-from-qe-remains-elu...

 

Sat, 07/05/2014 - 08:59 | 4926300 taggaroonie
taggaroonie's picture

The US imports products with dollars it has conjured from software tricks.

It gets stuff, and gives IOUs of decreasing value back.

I'm quite impressed.

 

Sat, 07/05/2014 - 10:18 | 4926379 wrs1
wrs1's picture

Except that in the case of oil and refined products, it's actually producing something of real value, sooooooooo.

Sat, 07/05/2014 - 09:48 | 4926322 wrs1
wrs1's picture

Here is what the article isn't saying. There are high paying jobs in the oil fields and instead of being in the ME  they  are now back here in the US.  Instead of sneering at the unsustainability of shale, it might be wise to look into it's viability.  At these oil prices a decent shale well can pay itself back in 6-9 months.  The production from shale tends to be much higher in the beginning than a conventional well and so it does support a higher cost.  Eventually the cost of drilling will come down as they figure out better ways to deal with the issues of drilling in the shale.  As that happens, the profit per well will increase.  The shale oil wells probably will poduce more than a conventional well and this won't be on the same production schedule, they will play out sooner but this will necessitate more drilling which is good for the economy.  I am not sure why it is that all the articles around here must have negative spin.

 

Sat, 07/05/2014 - 10:57 | 4926433 yogibear
yogibear's picture

Rack up that charge card before you default.

Sat, 07/05/2014 - 11:02 | 4926439 yogibear
yogibear's picture

Give the Chinese and others pieces of paper with portraits of US presidents and they give you real goods. These countries must be fools.

Sat, 07/05/2014 - 13:20 | 4926760 novictim
novictim's picture

"Shipping jobs overseas is GOOD!"  

If you agree then vote Democrat or Republican.

If you disagree then start working to get money out of our politics.

MONEY IS NOT SPEECH.  CORPORATIONS ARE NOT PEOPLE.

Sun, 07/06/2014 - 15:37 | 4929492 zerohedgejjxxzz12
zerohedgejjxxzz12's picture

The coruption and lies will continue until the people wake up, but that won't happen for a while yet, Because Obumner has everything under control and the economy is recovering!

Remember the Gov would never lie to it's people!

Do NOT follow this link or you will be banned from the site!