Wednesday, March 10, 2010

Today's import stats

The U.S. is "only" importing 9,724,000 barrels of Oil per day (last 4 weeks average). At today's price of $82, that's an annual $291 BILLION trade deficit JUST FOR OIL.

Actually, that is not as bad as it once was. In 2006, the U.S. was importing 12.5 million barrels of Oil per day...

Click this link. Notice how the U.S. trade deficit just keeps getting better? That's mostly because oil imports have steadily declined (keep that in mind the next time this administration takes credit for bringing the trade deficit under control). Let's use an expected average of the past 6 and next 6 month's average of $30 billion per month, or $360 billion per year.

Not to worry, the trade deficit is going to keep getting better! Oil imports WILL approach zero sometime by the end of the decade, and the U.S. trade deficit will be a thing of the past.

Good thing, too. We don't need any competition for funding the world's largest debtor nation's incredible liabilities - not even from ourselves.

Still I wonder... without Oil... how do we pay back the national debt (especially as it smashes through 100% of GDP)? Is it a coincidence that as the trade deficit falls the budget deficit just hit a monthly record? NAFC. Not even a little bit.

How does anybody pay back any of their debt? Is the net of all this deflationary? Or inflationary?

More soon...


18 comments:

confederate miner said...

Greg
What would the word be for a rise in prices on pure supply demand reasons? what would that look like accompanied with deflation in money supply?

Greg T. Jeffers said...

Not sure what you mean.

confederate miner said...

To me inflation is an increase in the money supply which results in higher prices because of loss os value of the monetary unit not supply demand fundamentals. Say the moey supply stays the same but supply of oil goes down then price of oil goes up not because of inflation because the money supply hasnt changed. Imagine the money supply is deflating but the oilk supply is deflating at the same rate or faster.

Greg T. Jeffers said...

That, my friend, along with timing... is the 64,000 question. If i knew that with any certainty, I would much wealthier than I am...

Wish I could be more helpful

confederate miner said...

juat been thinking of how destructive an unstable money supply is .Imagine you were a carpenter and an your unit of measurement was constantly changing. say a inch kept getting shorter as time passed by how could plan your design order your materials etc.

Greg T. Jeffers said...

Exactly why this business can be so painful

Dan said...

I came to the conclusion that we were in for a hyperinflationary collapse right after Paulson asked congress for TARP. The problems were intractable and one does not drop 1 trillion and then walk away (700B TARP + 400B Fannie & Freddy).

While I came to the opinion that it will not happen immediately, after taking my lumps, however, I still think it is the end game. Strengthening that opinion is Karl Denninger’s point that government benefits are indexed for inflation, thus unless social security, etc., are cut any inflation the govt. manages to create in an effort to ameliorate the problem, in actuality only compounds the problem.

Compound that with Mike Shedlock’s frequent postulation that wages do not keep up with inflation, whitch means the tax base will not keep up with inflation, and we are even more SOL.

Dan said...

Of course one would think the aforementioned problems would raise the interest rate on T-bills further exacerbating the problem, but given recent history it may drive it negative. Surely it can’t be this bad and there mitigating factors I am overlooking? Perhaps tomorrow I should get up on the other side of the bed.

Donal Lang said...

CM: Inflation is the devaluation of money, as you say.
Oil price goes up, worldwide and in real terms, because of increasing demand.
American and European demand has been falling, reducing demand, but all the oil 'made available' has been bought by China and India.
It is therefore impossible for increasing demand from EUrope and USA to happen; increasing Chindia demand will take ALL the extra.

Bottom line - prices are going up, oil based currencies are going down, bigtime.

bureaucrat said...

The price for oil cannot go above $80 for any length of time. It shuts down the U.S. economy too much. That makes sense. If I can't afford the gas, I don't buy as much. My demand goes down, and so do a lot of other peoples'. That hits the energy industry, and they can't sell as much unless prices come down. A negative feedback loop. :) Seen it happen.

westexas said...

Bur:

A relevant article for you to peruse:

http://www.theglobeandmail.com/blogs/jeff-rubins-smaller-world/looking-for-oil-demand-in-all-the-wrong-places/article1494934/
Looking for oil demand in all the wrong places

Excerpt:

"Exactly why oil traders and speculators think the (US inventory) data has anything to do with the state of world oil demand is beyond me. I suppose, like Pavlov’s dog, they’re only doing what they’re trained to do. But their training comes from a world that no longer exists.

While the U.S. oil inventories data pertains to the largest oil-consuming nation on the planet, it is no more indicative of world demand than U.S. oil production numbers are indicative of world supply. Both are in terminal and irreversible decline."

Greg T. Jeffers said...

Bur:

That $80 number was bandied about when we were importing 12.5 Mbpd and Nat Gas was double where it is today.

For Oil alone to do the trick, the price will need to be somewhat higher given current environment...

not that I am willing to stake my life on that...

oOOo said...

I know this is off topic, but wow, if this isnt a sign of how messed up things are, I dont know what is. Wallstreet milking billions in bonuses, meanwhile mass closing of schools has been approved due to bankrupcy:
http://news.yahoo.com/s/ap/us_closing_schools

Donal Lang said...

The price of oil cam reach whatever the highest bidder is willing to pay. For the moment Chindia is investing in infrastructure which shows investment returns, but The West is just spending it on car fuel and consumer crap and maintaining what we already have; industrial farming and trucking distribution, for example. Me, I can easily 'see' $300 a barrel.


What price will the military go to for a gallon of fuel? And at that price, who else will still be in business??

bureaucrat said...

If you don't like the $80 figure, pick one more to your liking. :) The same principle applies.

The peak oil people have concentrated 94.547% of their attention to oil supply, and how fast it is coming out of the ground.

They ignored almost entirely the demand side. It wasn't until I started yelling "MISH!" to Jeffers and started examining 500 years of asset bubbles (this has all happened before) before I realized how inportant demand is .. like, how high you can price your product based on demand, and how marginal the oil business was.

As Mish pointed out, in a deflation (which we are in now), rare tho it is, demand collapses, badly impacting businesses of all types, including the energy businesses.

If there is no demand, the oil companies HAVE to have cash come in the front door to survive, and they will drop their prices to whatever will pay their fixed costs. That is the situation we are in now, in all sorts of businesses.

Higher prices mean less demand, which results in lower prices. The solution to higher prices IS higher prices. :)

As far as worldwide demand goes, the China thing will fall apart once the demand for junk from the U.S. and Europe falls off -- likely due to our credit impairment (credit cards and mortgages maxxed out). This is where I think Jim Rogers may be wrong on China, though I am still investing like him.

The oil industry says the world can't live without oil. With 350% debt to GDP in the U.S., and 200% debt to GDP in Japan, and God knows what the figure really is in China, I beg to differ. :)

Oil ain't going to $300 a barrel. Please.

westexas said...

Bur:

Your quotes:

"The price for oil cannot go above $80 for any length of time."

"Oil ain't going to $300 a barrel. Please."

Pretty good gap between these two prices.

But in any case the Thirties case history is instructive. It appears that global demand only fell one year, in 1930, rising thereafter. Oil prices in the US hit their low point in the summer of 1931, rising at 11%/year from the summer of 1931 to the summer of 1937. Based on "Only Yesterday," there were three million more cars on the road in the US in 1937, than in 1929. Big difference today is that hundreds of millions of people worldwide want to drive a car for the first time.

bureaucrat said...

And don't forget they want air conditioners as well (everyone in Iran wants a car and an air conditioner). Whether this planet can supply 7,000 million people (America has 320 million) all the things that Americas have is getting harder to believe. And the 6.7 billion sure don't have the money to buy (or borrow) everything that would make them Americans. The Chinese thing is overrated -- they can't even get the cheap workers from the countryside to come back to work after the Panic of '08 (an Al Jazeera report). Can a country drowning in corruption like China seriously get anywhere? It is a big bubble. Supply for oil will dry up, demand will fall, and walking will become the new "black." :)

bureaucrat said...

From the Agora Report today ..

“Exactly why oil traders and speculators think the data has anything to do with the state of world oil demand is beyond me,” says Jeff Rubin, who walked away last year from a cushy post as chief economist at CIBC World Markets so he could speak his truth.

“While the U.S. oil inventories data pertains to the largest oil-consuming nation on the planet, it is no more indicative of world demand than U.S. oil production numbers are indicative of world supply. Both are in terminal and irreversible decline.

“It certainly wasn’t U.S. fuel demand that took oil prices over $100 in the first place, and it won’t be U.S. fuel demand that will push them back into that range anytime soon. U.S. oil consumption is almost 3 million barrels per day short of its pre-recession peak.” And it will never return to that peak, Rubin asserts.

Result? “As China moves from consuming 8 million barrels a day to 10 million barrels, and OPEC ramps up its own daily consumption from 10.5 million to 12 million barrels, somehow, somewhere else in the world, there must be a corresponding decline in oil consumption. That somewhere else just happens to be the U.S. market and the oil markets of the other OECD economies.”

“That’s why Saudi Aramco is far more interested in securing long-term supply contracts with rapidly expanding domestic oil markets in countries such as China and India than in supplying shrinking oil markets like those in the U.S.”

There’s China again. As we mentioned a month ago, China has now eclipsed the U.S. as Saudi Arabia’s biggest oil customer.