DTIC ADA487576: The U.S. Trade Deficit, The pdf

DTIC ADA487576: The U.S. Trade Deficit, The

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Rapid changes in the price of oil and the impact of such price changes on economies around the globe has attracted considerable attention. In mid-2008 as the price of oil rose to unprecedented heights and then dropped sharply, the international exchange value of the dollar fell and then rose relative to a broad basket of currencies. For some, these two events seem to indicate a cause and effect relationship between changes in the price of oil and changes in the value of the dollar. Despite common perceptions that there is a direct cause and effect relationship between changes in the international exchange value of the dollar and the price of oil, an analysis of recent data indicate that the rise in the price of oil is being driven by an increase in demand that is exceeding the increase in supply. This report analyzes the relationship between the dollar and the price of oil and how the two might interact.

While the data do not support a strong cause and effect relationship between the value of the dollar and the price of oil, there likely are various channels through which changes in the price of oil and in the value of the dollar may be indirectly correlated. The data also indicate that an increase in the demand for crude oil that exceeded the increase in the supply of oil and a laggardly pace in oil production capacity likely are among the main factors behind the sharp run up in the price of oil in the first seven months of 2008. The rise in oil prices also is affecting the U.S. trade deficit. This report provides an assessment of the impact a range of prices of imported oil could have on the U.S. trade deficit. This report will be updated as events warrant

• Creator/s: Defense Technical Information Center
• Date: 9/29/2008
• Year: 2008
• Book Topics/Themes: DTIC Archive, Jackson, James K, LIBRARY OF CONGRESS WASHINGTON DC CONGRESSIONAL RESEARCH SERVICE, *DEFICIENCIES, *OILS, *INTERNATIONAL TRADE, *COSTS, IMPORTS, CRUDE OIL, SUPPLIES, CAPACITY(QUANTITY), PRODUCTION, COMMERCE

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