Cheniere Energy, Inc. (LNG), Devon Energy Corp (DVN) – Oil Boom: How America Saved $175 Billion a Year

Slap a dollar amount on that figure, and you’re talking real money. Energy analyst Daniel Yergin wrote last year:

The increase in domestic oil production over the past five years will reduce our oil-import bill this year by about $75 billion. The growth of shale gas will save the U.S. from spending $100 billion a year on imported [liquefied natural gas], which was the likely prospect five years ago.

$175 billion per year. And that was last year. The savings is almost certainly more this year, with lower crude imports and higher finished-product exports.

The end result: An oil boom equals a smaller trade deficit. The economy’s overall trade deficit — the amount our imports exceed exports — has fallen by half since 2008, to 3% of GDP from nearly 6%:

Bureau of Economic Research.

A decade ago, Warren Buffett worried about our growing trade deficit and told Fortune magazine:

In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than we produce–that’s the trade deficit–we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.

We’re still selling off the farm, but much less than before, and much less than nearly anyone expected just a few years ago.

Analysts trying to figure out how to benefit from America’s energy boom tend to zero in on specific companies. Cheniere Energy, Inc. (NYSEMKT:LNG) has an opportunity in liquefied natural gas exports, Devon Energy Corp (NYSE:DVN) in fracking. But the biggest beneficiary may be the economy at large — you, me, everyone. We now live in an economy less reliant on strangers for energy than we have in over a decade. There is a rebuttal to rejoicing over this; some say imported oil is our friend. But as Buffett worried a decade ago, an ever-expanding trade deficit meant “we have entered the world of negative compounding — goodbye pleasure, hello pain.” That pain is quickly turning into a pinch.

The article Oil Boom: How America Saved $175 Billion a Year originally appeared on Fool.com and is written by Morgan Housel.

Fool contributor Morgan Housel has no position in any stocks mentioned. The Motley Fool owns shares of Devon Energy.

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