Probably everyone has noticed already but crude oil hit $126 a barrel on Friday, just in time for the summer driving season. The significance of this is deeply reflected in our national trade deficit where according to the US Department of Energy we import 12 to 14 million barrels of oil per day. Foreign oil imports account for over $1.5B per day and are the single largest contributor to our balance of trade deficit.
Importing oil and foreign goods exports local dollars and has contributed to the decline in value of US currency. Iran, the second largest oil producer in OPEC has stopped conducting transactions in US dollars, in favor of euros or the yen, to reduce their reliance on Washington economic and foreign policy.
America once produced enough domestic oil to provide cheap gas and even to export surplus resources and build our economy but those days are over. Exporting our dollars leaves less money available to invest in our infrastructure or even to invest in other sources of wealth. In contrast, China with whom we have a record $233B trade deficit, recently secured control over one of the worldâ€™s largest copper mines in Afghanistan.
Copper is a necessary component in the production of electricity along with magnets. China is estimated to hold 98% of the worldâ€™s neodymium reserves used in the production of high gauss magnets critical to the production of electricity. It would be fair to speculate that China is heavily vested in energy production.
The US is the largest oil consumer in the world and with domestic production drying up it is no wonder that our trade imbalance is so high. Presently, at an average of 27 gallons per day per soldier, the Pentagon accounts for the largest percentage of oil consumption spending $14M per day or over $5B a year just to stay in Iraq. Estimates indicate that the US military consumes as much oil as it liberates occupying Iraq.
It is worth noting that our defense systems are heavily dependent upon magnets as well as oil. Every fighter jet, weapons and guidance system, humvee and hand held communications device requires magnets, most of which are gotten directly or indirectly from China
So sorry is our dependence upon foreign oil that Russia, which now produces much more power than it consumes, is now outpacing the US on strategic energy alliances. Our dependence has greatly weakened our standing around the globe.
Oil company profits are at record highs, averaging $1,300 per second while consumers are paying record highs at the pump. One consequence of this demand on our pocketbooks is that our consumption has dropped which induced a record 5.7% drop in imports last March. This resulted in a .3% greater than expected increase in economic growth according to the US Department of Commerce.
Certainly .3% is not a lot but it is something and demonstrates the importance of if not having a trade surplus at least balancing imports and exports. Coos County suffers from a trade deficit as well and exporting our dollars instead of localizing them has the county labeled as economically distressed and suffering from high unemployment.
Like the national statistics this impaired spending may force us to consume less or rethink ways of keeping our dollars local. Obviously, one way is to use less energy or start producing energy locally. Small things can make a difference. Last March during Earth Hour communities around the globe participated by turning off lights and appliances for one hour and in Sydney, Australia it amounted to a 10% reduction in energy use across the city. Here in Coquille the only house dark during the hour as we walked around was mine and a friendâ€™s.
Our economy will force us into conservation but we can also voluntarily take daily small steps toward local economic independence and environmental responsibility. Walk or ride a bike whenever possible. Turn off your lights and refrigerator for an hour each day. Buy locally grown produce that isnâ€™t shipped and imported from outside the county. We need to keep our dollars local.