Originally Posted by
aerospacepilot
Trade deficit
We import 3.67 billion barrels of oil a year. At $100/barrel, that is $367 billion US dollars that goes overseas. Sounds like our trade deficit is hugely due to importing oil.
Airlines slowing down hiring
Yes, aviation is very cyclical. But the fact is that $100+ a barrel oil is the primary, absolute biggest reason why airlines are not growing as much as they should. Why hiring has slowed down. Why pilots are not getting year 2000 type contracts. Ask Expressjet. Ask Skywest. Ask the majors like United, who, for every $1 a barrel increase in the price of oil costs them $45 million dollars a year in revenue (so $40/barrel rise in 12 months means $1.8 BILLION dollars a year). The airlines can't raise fares fast enough because it will scare away some passengers. Why won't passengers pay extra for their tickets?? Because the economy is hurting due to... high energy prices.
Economy
Of course high oil prices are slowing down the economy. I don't even feel like I need to argue that one.
Tax Cuts
You are right. Tax cuts do stimulate the economy. But why does the economy have to be stimulated??? High energy prices. I would rather see lower energy prices stimulating the economy and tax money lowering the US budget deficit.
The fact is that high energy prices hurt the United States so much. You just have to think about it.
Aero,
If you have no doubt that oil has nowhere to go but to go up, up and up, then I would highly recommend you invest every nickle of your net worth into oil as you will inevitably be a very wealthy man one day.
As for implicating trade deficts as one of the main drivers of high oil, thats completely a huge stretch.
Trade deficits are perhaps the single most misunderstood statistic in all of economics and international business. I can't remember the exact years, but I believe America has shown a trade deficit for the past 200 years or nearly so.
Anyway, In short, trade deficit reflect the flow of capital across borders, flows that are determined by national rates of savings/investment and should not cause a need for worry. A trade deficit reflects a fact that America (or any other country) remains a place attractive enough for foreign investment. If you want to reduce the trade deficit then a recession is the best way to do that.
You cannot blame negatives of unemployment, high oil, slow growth of the airline industry, unfair trade practices abroad or declines in industrial competitiveness on the trade deficit.
International trade or trade deficits is NOT a zero sum game, one country is a winner- and one country is a looser. Nope, that is not how it works contrary to what protectionism politicians, Lou Dobbs and college professiors try to spout. If a country is buying more goods and services from abroad than its selling, then the country must also be selling more assets to the rest of the world than its buys.
First step to correcting this unnecessary and pridicable situation is that American government must stop bleeding the devaluation of USD. Secondly, big government social spending needs to come to a quick stop and "magically" you will start establishing sound monetary policy.
Only after this is accomplished, can we start to figure out how to reduce oil dependence without again destroying the currency, economy and prestige of America in the process.
EAHINC