In February 2005, energy received a few paragraphs and a sidebar in the Economic Report of the President prepared by the Council of Economic Advisers. In mid-February of this year, it consumed an entire chapter.
This is the difference that a year-and a Category 5 hurricane or two slamming into the US Gulf Coast-can make.
In the report’s introduction this year, President George W. Bush noted that passage of the 2005 Energy Policy Act “will help increase the reliability of our energy supply and the efficient use of the energy we have.” But, he continued, the US must continue to find new ways to diversify its energy sources and become less dependent on foreign suppliers.
The chapter on energy in the president’s 2006 report discussed developments in markets for crude oil, petroleum product, natural gas, and electricity. It made four main points.
The first was that steadily rising crude oil and product prices the past several years have stimulated development of energy alternatives. The second was that disruptions to energy supply and distribution networks, such as Hurricane Katrina, can lead to short-term price spikes.
Expanded trade
The third was that continued expansion of natural gas and other energy markets “through regional and global trade can improve our economic security by increasing access to low-cost energy resources and mitigating the impacts of local energy shortages and price increases.”
And the fourth was that without government incentives, individual energy producers and users may not be able to solve their problems. Carefully chosen government policies, based on economic incentives, “can therefore be beneficial supplements to markets,” the president’s report said.
Energy was prominent in another federal government report this month.
The Department of Commerce reported that the US foreign trade deficit grew by $108.2 billion, or 17.5%, to $725.8 billion in 2005.
On a seasonally adjusted, end-use basis, the trade deficit increased 17.5% during 2005 to $782.1 billion.
Petroleum import costs climbed 39.4% to nearly $251.62 billion as export revenues grew 31.4% to $22.44 billion. The resulting US petroleum trade deficit climbed $65.8 billion, or almost 40.3%, to $229.17 billion.
Price vs. demand
The report also showed that price played a bigger part in increased US petroleum import costs than demand during 2005. It said that US crude oil and product imports, not seasonally adjusted, grew 1.7% to more than 5 billion bbl. But the total cost climbed 39.4% year-to-year to $243.18 billion.
Total crude oil imports actually declined 1.8% in 2005 to 3.75 billion bbl, the Commerce report said. But the US crude oil import bill increased by $43.82 billion, or 33.3%, to $175.56 billion as the average unit price rose to $46.78/bbl from $34.48/bbl. ✦
