The trade deficit has turned very oily lately

I'd say another reason for the declining non-oil trade deficit is the weak dollar, which is also contributing to oil's high prices.

I think the high oil price is the artifact of an investment bubble. When the tech bubble popped, there was a lot of liquidity that had to go somewhere, and a bunch of it went into housing, because people always need a place to live, right? so it seemed a safer investment that was producing record returns but thanks to new investment tools and the fact that it was a "need" rather than "want" section of the economy would be largely immune to downturns.

I think the same thing is happening with oil futures. When crude started to drop a few days ago, the co-chair of Morgan Stanley's global economics came out and said he thought oil would hit $150 a barrel by the end of the year. Prices immediately rallied.

If you were a big time investor in the tech bubble, then in the housing bubble, you're probably predisposed to look for the same kind of easy returns that such speculative markets produce. It seems like a lot of money has been moving into speculative oil lately, and more of it than is really justified by the current levels of instability/demand. My personal guess is oil will hit a truly stupid high then crash moderately hard to its true market high.

In addition to the money we spend to actually buy all this imported oil, I've seen a quote from Fred Smith (of FedEx) that you can attribute about half the US military budget to protecting our access to imported oil. So, depending on whether you count the costs of the Iraq and Afganistan conflicts for this purpose, that means we are spending about $200B to $300B a year on military costs to protect our right to spend $449B on imported oil. And since we run an overall trade deficit and an overall budget deficit, we are actually borrowing all of it from the rest of the world.

Makes you feel proud to be an American, huh?

Justin has already nicely pointed out that gasoline prices have been kept artificially low in the US by hiding its true costs, essentially a subsidy paid for by taxpayers and the global environment. Sean makes an interesting statement, though, on the "oil bubble" concept which is starting to ooze into public consciousness. Next, the food bubble? Then the water bubble? Is the market really that dumb? Maybe.

What really is the true market price of oil? They can produce it in Arabia for an awful lot less than $125 per barrel. So is it the production cost for the next least expensive source of energy? Of oil from tar sands? Certainly not subsidized ethanol from corn. Is it the price where new energy technologies become competitive? Should we have a carbon tax so clean energy can be pursued? The next few years should be interesting.

I tell you what's going on here! The Rockefellers are getting filthy rich, and its killing the small guy. We should already have another 100 nuclear energy facilities up and running, with 100 million electric cars on the road. That's the answer! It's too bad the technology was squashed in the mid 80's by big oil and crooked politicians.

Wind energy, tidal energy, sun, and anything renewable to get the little electric car from point A to point B. That is what we need.

What needs to happen is a president needs to challenge the nation to be completely energy independent in a decade. Like Kennedy challenged us to go to the moon. Every university should be all over this, every high school, every science club, every man woman and child.

Then the trade deficit would become a surplus.

Just remember that energy independence will come with a price. It may indeed be a good idea but it's not going to reduce the cost of running our vehicles.

Oil imports are a reality. It is nice that the rest of the trade deficit is declining, but it must decline a heck of a lot before our trade deficit will disappear.

We have an oil dependent way of life. We will have an oil dependent way of life until the price of oil gets so high we cannot afford it.

Since I want my grandchildren to live in a country that is not dependent upon oil imports hanging over our head, I have long advocated high federal gasoline taxes, so as to wean us away from oil.

I think our country as a whole is a bunch of addicts. We are addicted to oil; we are addicted to entertainment, to food and many of us are addicted to drugs of all kinds, including perscription drugs.

Quiting is hard - for all of our addictions. Oil is the one we can throw off merely by raising the price of gasoline to approximately the price paid in Germany - $8 per gallon. Not immediately, but the laws should be passed to graduadly increase the final price of gasoline every year by X%, using increased gasoline taxes to fill in and replace each decline in the gloabal market price for oil.

That is a law that would really frustrate the seculators in oil futures.

ReformerRay

Don't you people get it!? The United States is the largest oil consumer in the world. It follows that we should also be one of the largest producers. There are a lot of environmentalist idealists in this county who want it both ways...They want to maintain their pleasant economic standard of living and at the same time want us to all burn less oil. Well, now they are going to get their second wish, but the cost to America's standard of living may be a lot deeper than many people presently realize. Oil is THE most important commodity in the world. It is also exceedingly inelastic(at least in the short run). What is happening, and actually has been happening for quite sometime now is that we have been throwing more and more dollars on to the world currency market to pay for our trade deficit, with oil being the biggest contributor. This has flooded the world with excess dollars which has kept the interest rates and the cost of money low. This has created the investment bubble environment we are all so familiar with. Alternative forms of energy are important to pursue, but if the United States were committed to producing as much oil as possible within it's own borders, we would not be in this fix. The price of gas goes up....we flood the world currency market with more dollars....the value of the dollar falls....the price of gas goes up....we flood the world currency market with more dollars....the value of the dol.........It will be interesting to see how this ends. If the roof caves in, I certainly would not want to be an environmentalist concerned with Man made global warming(which, by the way is a crock - Read about Tambora in 1815 - an insult to the earth's atmosphere far larger than any environmental insult that mankind could ever cause, and how within a short span of one year the earth's atmosphere was virtually back to normal).

We are producing as much oil in this country as is possible, given our free market system - and our desire to protect the environmnent. I am glad we have laws that limit where drilling can take place. Oil entropreneurs are not known for concern for what they mess up or what they leave behind.

The market demand for gasoline is strong, not only in the U.S., but it all those other countries that have been acquiring dollars by sending more goods to the U.S. than they buy from the U.S.

T. Boone Pickens knows about the potential for getting more oil from the U.S. A. He says we must turn to alternative sources of energy to reduce our dependence on foreign oil.

[...] other countries. That’s where making our own energy will help us dramatically. According to this article on the TIME website, Oil accounts for the majority of our trade deficit. We’ve been spending more on goods from [...]