“Trade‘s been a buffer; it‘s kept GDP [gross domestic product] in positive territory. It‘s clearly a cushion.” -Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, as quoted in the USA Today newspaper.
There‘s no question our economy is hurtin‘ big time right now - and as you all know so well out there, the trucking industry is feeling more than its share of pain. With oil prices hovering at nearly $140 a barrel, resulting in gasoline costing an average of $4 a gallon nationwide and diesel at nearly $5 a gallon (almost $6 in California), we‘re at historic levels of agony in this industry.
The jump to $2 a gallon diesel from a mere 90 cents a gallon back in 2000 - an upward tick that spawned several dramatic big rig protests on Capitol Hill in Washington D.C. - pales in comparison to what‘s happening now. Did you know that Americans drove 11 billion FEWER miles in March compared to the same month in 2007? That‘s the sharpest monthly drop in driving ever since the federal government began collecting these statistics in 1942. Yet oil prices STILL went up, despite such slackening in demand.
There‘s an awful lot ingredients that form the ugly economic stew we‘re in right now because of such astronomical oil prices. Don‘t forget, it‘s taken a long time to get here: roughly 25 years, since the last major oil shock we experience back in 1973 due to the Yom Kippur war in the Middle East. All those long lines at the gas stations around the U.S. came during a time when we imported 33% of our oil. Today, by contrast, we import over 58%.
We also haven‘t built a new refinery in almost two decades, which puts a rigid ceiling on our ability to produce diesel and gasoline from raw petroleum. Them in the 1990s, the nation as a whole began buying and driving SUVs and trucks in huge numbers, which significantly drove up fuel consumption in the U.S. China and India‘s rapid industrialization of the past decade - and their new-found demand for cars and trucks - is also driving up demand for oil. China‘s demand for oil alone should grow 5.5% this year, a by-product of nearly 20% growth across its economy.
Then there‘s all the speculation in the oil futures market right now, with billions being funneled into contracts by hedge funds, private equity funds, and other non-regulated investment entities that‘s keeping prices up. Deny it all they like, but when U.S. demand for oil drops 5% in the span of several month, yet prices still go up, laws of supply and demand are clearly being bypassed somewhere along the chain.
So that‘s all bad, ugly news to be sure. However, there‘s a lot of GOOD economic stuff happening, too, thanks to burgeoning trade. Sure, we‘re still in a trade deficit since oil is so costly and the dollar is so weak, but exports are running at a fast pace and companies are relocating operations to the U.S. from Europe and other locales because high oil prices are pushing their transportation costs into the stratosphere.
(Boeing is reporting a big rise in jet orders -- in part because the U.S. dollar is so weak.)
The 7.8% increase in the U.S. trade deficit this April to $60.9 billion overshadowed 3.3% growth in exports, to $155.5 billion - the biggest jump since February 2004. Leading the way were sales of commercial aircraft, automobiles, and agricultural machinery. John Deere said it sales would jump 30% in South America alone this year. Economists are already revising their growth figures for the U.S. economy based on those strong export numbers, with Morgan Stanley predicting U.S. GDP will increase 1.1% in the first quarter, instead of its earlier projection of 0.9%.
(Containers lined up for export. Photo courtesy of Absolute Freight.)
There‘s still plenty to worry about, not the least being the rapid jump in unemployment figures. One state that‘s not doing well at all is Michigan, with unemployment at 7.2% and a state economy contracting by 1.2%. But overall, things are better in a lot of economic areas than many think. Let's just hope the good outweighs the ugly sooner rather than later.