Last year – for the first time ever – the United States recorded an annual trade surplus with the Organization of the Petroleum Exporting Countries (OPEC), according to recent U.S. Bureau of Economic Analysis (BEA) data. In fact, the United States finished $6.6 billion in the black in its 2015 trading with OPEC.
That’s, of course, thanks to the massive expansion of U.S. oil and natural gas production from hydraulic fracturing (fracking) technologies.
Posting an annual trade surplus with OPEC is not just out of the norm for the U.S., it’s a complete reversal of decades of trading. Since 1985, U.S. dependence on oil from OPEC drove large trade deficits, which continued grow ever-larger through the 90s and 2000s. However, BEA data shows that trend started to reverse in late 2011, as increasing production of U.S. crude cut the quarterly trade deficits through 2014 until a surplus was reached in the first quarter of 2015.
It’s no coincidence the flow of trade shifted back toward the U.S. in 2011, as that was about the time the U.S. shale revolution was in full force. During that same period, U.S. oil production increased by about a million barrels per day, and reaching over 8.7 million barrels of crude per day by 2014.
Beyond the vast amount of resources unlocked by fracking, other factors also contributed to increasing the surplus between the U.S. and OPEC. The drop in crude oil price, for instance, when coupled with the lower imported oil volumes helped to decrease the trade deficit. These lower prices however, are a double edged sword as they have also pushed down various sectors of the U.S. economy.
Many economists still believe that lower oil prices are beneficial to the domestic economy, eventually lifting it from current levels. As T. Homer Bonitsis, an economist and researcher at New Jersey Institute of Technology’s School of Management, was recently quoted in an E&E News article:
“I think later this year, the [gross domestic product] growth will be quite impressive because of [lower oil prices],” Bonitsis said. “This will eventually work to improve the U.S. economy, and your average American household will realize the significant savings, and it will be a boost to the economy.”
Overall, the U.S. posting a $6.6 billion trade surplus with OPEC is a testament to the advancements the U.S. has made in oil and natural gas development over the past decade. With the help of technologies like fracking and horizontal drilling, U.S. oil producers have provided thousands of new jobs, boosted the domestic economy and, as the new BEA data show, significantly reduced our dependence on foreign oil.