Shrinking oil bill sends US deficit lower

The U.S. trade deficit fell in November to the lowest level in almost a year, thanks to the country’s swiftly shrinking thirst for foreign oil.

The deficit - imports minus exports - narrowed to $39 billion during the month, down 7.7 percent from a revised October deficit of $42.2 billion, the Commerce Department reported Jan. 7.

U.S. exports slipped 1 percent to $196.4 billion amid lower sales of commercial airliners.

Primarily due to oil, imports posted a steeper drop of 2.2 percent to $235.4 billion. The volume of crude imported in November hit its lowest level since 1994, while the average price hit a two-year low of $82.95 a barrel. A simultaneous boom in domestic oil production has also cut the country's reliance on imported oil.

Economists predict that the oil market will continue to reduce the U.S. trade deficit and potentially bolster the overall economy. To be sure, a lower bill for foreign oil is likely to be offset somewhat by a stronger dollar, which makes U.S. goods more expensive in overseas markets, and economic weakness in such key export markets as Europe and Japan.

“The trade gap will continue to shrink apace until the oil import tab stops falling like a rock,” said Patrick Newport, an economist at Global insight.

The November deficit was the lowest since a trade gap of $37.4 billion in December 2013. Through the first 11 months of 2014, the deficit is running 5.1 percent above the same period in 2013.

For the first 11 months of 2014, U.S. energy exports are up 9.6 percent compared with the same period in 2013, putting them on track to hit a record even with the recent fall in prices.

- Associated Press