Mumbai: US trade deficit widened by $4.7 billion in the first three months of 2007, following a rise in oil prices, data released by the commerce department showed. This took the country''s balance of payments to $192.6 billion, from a revised $187.9 billion in the last quarter of 2006.

US trade gap widened despite an increase in goods exports to $270.1 billion from $266.5 billion, as imports rose to $471 billion from $466.8 billion.

Capital payments to foreigners also increased considerably to $20.7 billion from $26.1 billion due in part to money paid to the Middle East and private remittances.

The rise in trade deficit, however, was less than analysts had forecast and many expect it to narrow over time as exports increase.

The US has seen its trade deficit at record highs for five years in a row despite robust growth in exports.

"Robust export growth, and some cooling in import growth, should keep the deficit down this year," he added.

Some analysts say the trade deficit was caused by an overvalued dollar against the Chinese yuan as well as an inadequate energy policy making the US overly dependent on foreign oil. These underlying trends, they say, needs to be reversed.

But there is more to it than just the overvaluation of the dollar. Rising oil prices made it worse for the increasing US trade deficit.. The value of petroleum imports shot up by $230 billion between 1996 and 2006, which represents a 300 per cent increase. Because the volume of oil imports increased only 35 per cent, the vast majority of the surge in import values occurred because of the sharp rise in petroleum prices.

Reducing the current account deficit is rather straightforward, at least in theory. Because the US has been spending more than it produces, it has been incurring current account deficits. Therefore, reducing the deficit simply means bringing spending back in line with production. Slower US economic growth should translate into slower spending growth, and dollar depreciation can help shift production from foreign economies to the US via changes in relative prices. It sounds simple, at least, in theory. However, a closer look at the the structure of the trade deficit reveals that a significant narrowing of the deficit may be more difficult to achieve in practice.