US Says Rising Oil Prices Have Led to Global Trade Imbalances

A research report by U.S. Treasury officials shows that rising oil prices have become an important factor leading to global trade imbalances, and oil exporters should work with the United States, Asia and European countries to contribute to adjusting trade imbalances.

Research points out that the United States' oil imports in 2005 rose from US$104 billion in 2002 to US$252 billion. At the same time, the current account surplus of Middle Eastern countries rose from US$30 billion to US$218 billion. Saudi Arabia's surplus has even reached 30% of gross domestic product (GDP).

The authors of the report, T. Ashby McCown, L. Christopher Plantier, and John Weeks, said that under normal circumstances, rising oil prices have a negative impact on global trade imbalances. The impact will be relatively small, sometimes even negligible. "But this time, oil prices have remained high, which has had a serious impact on global trade imbalances."

The report said that oil exporters should play their due role in solving global imbalances together with emerging Asian countries, the United States, Japan and Europe.

The report points out that judging whether the policy actions of oil exporting countries are appropriate should take into account the specific circumstances of each country. Some poorer exporting countries should spend most of their new revenue on imports. Countries with mature oil reserves, such as Norway, Russia, and Oman, should manage their incomes steadily and in a balanced manner. Big oil-exporting countries should reserve part of their revenues while repaying debt to protect against future oil price falls. If oil prices remain stable, they should invest in projects with higher social returns, consolidate economic development, provide people with better living standards, and help resolve global external imbalances.

The report does not provide an in-depth analysis of how revenues from oil exporting countries are recycled into financial markets. It cited a report from the Bank for International Settlements that said the reflow into financial markets may account for only 30% of the new revenue from the Organization of Petroleum Exporting Countries (OPEC) since 1999. %. Of this 30%, two-thirds went to large banks, the remainder was used to purchase U.S. Treasury bonds and corporate assets, and a small portion was invested in German assets.

Data from the U.S. Treasury Department show that between January 2003 and September last year, oil exporters purchased a net US$158 billion in long-term US bonds... and a net purchase of US$113 billion in short-term US bonds and bank securities.

They may have purchased such assets indirectly through some foreign institutions. Some news and historical data show that investments from oil-producing countries have also flowed into construction loans, regional stock markets, private capital operating companies, etc., and may also include hedge funds outside the United States. Data in this area is not easy to track.