ECONOMIC REPORT OF THE PRESIDENT

Roughly speaking, the decline in the price of domestically-produced
oil sold to U.S. consumers has largely offsetting effects for American oil
producers and consumers—although differences in how consumers and
producers adjust to lower oil prices may differ enough for aggregate
impacts from this channel to appear over shorter horizons. Thus, the
primary boost to overall output comes from imported oil. However, the
share of imported oil has declined as domestic production increased and
domestic oil use fell, so the overall boost to the U.S. economy from this
oil price decline is smaller than would have been the case historically.
Changes in oil prices also affect the amount of investment done
by oil firms. Oil drilling and exploration dropped sharply in 2015 as
shown in Figure 2-i, and these declines weighed down U.S. investment
(and GDP) and are not reflected in the net-import savings discussed
above. Oil drilling and exploration, as measured by the number of oil
rigs in operation, peaked in September 2014 and dropped 62 percent by
December 2015. In addition, investment in oil and mining equipment
fell 40 percent during 2015. As shown in the “Drilling” line in Table 2-i,
the cutback in this investment reduced real GDP growth by 0.3 percentage
point in 2015, assuming that investment growth in the drilling sector
would have been unchanged if the price had not fallen. In addition, this
direct estimate excludes potential additional economic costs, including
the multiplier effect and also spillovers from the stresses in credit
markets associated with increased default risks of oil companies. On the
Figure 2-ii
Crude Oil Production and Net Imports, 1990‒2015
Million Barrels per Day
11
10
Net Imports
Nov-2015
9
8
7
6
5
Production
4
3
1990 1995 2000 2005 2010 2015
Note: Data are not seasonally adjusted.
Source: Energy Information Administration, Petroleum Supply Monthly.
The Year in Review and the Years Ahead | 57