World oil consumption slows as U.S. consumption falls
August 13th, 2008 by Jim JustToday the Energy Information Administration reported:
“Preliminary data indicates that global consumption rose by roughly 500,000 barrels per day (bbl/d) during the first half of 2008 compared with year-earlier levels, as a 1.3-million bbl/d rise in consumption outside of the Organization for Economic Cooperation and Development (OECD) was partially countered by an 800,000 bbl/d drop in U.S. consumption compared with year-earlier levels. The decline in U.S. consumption in the first half of 2008, reflecting slower economic growth and the impact of high prices, was the largest half-year consumption decline in volume terms in the last 26 years, when, in the first half of 1982, consumption dropped by nearly 800,000 bbl/d . . .
“During the first 5 months of 2008, [U.S.] petroleum consumption fell by an average of almost 900,000 bbl/d from the same period in 2007. During June and July, the year-over-year declines narrowed to just over 400,000 bbl/d.”
The Wall Street Journal reports that the reduction in consumption is at least partly due to Americans driving less:
 |
“Consumers are buying fewer sport-utility vehicles and more energy-saving washing machines. Some trucking companies have rejiggered their engines to max out at lower speeds. Gridlock is easing in California. Americans drove 966 million fewer miles in May than they did a year earlier, a 3.7% decline, according to the Transportation Department.”
The Federal Highway Administration says Americans continued to drive less in June, reporting that vehicle-miles traveled fell 4.7% from a year earlier. Driving has declined now for eight straight months. The decline is most evident in rural travel, which has fallen by 4% – compared to the 1.2% decline in urban miles traveled – since the trend began last November. The U.S. Department of Transportation complains the world as we know it is coming to an end: “We can’t afford to continue pinning our transportation network’s future to the gas tax.”
Oil has slipped 23% from a record $147.27 on July 11 – but prices are still 58% higher than a year earlier. Bloomberg reports that some analysts expect oil prices to test the $110 level as demand lags and July saw OPEC set an all-time production record. But will Americans backslide if prices fail to resume their rise?
But then there’s this wild card: what if OPEC dumps the dollar? Such a development now seems more possible and even immanent than ever before, as long-time petrodollar supporters like Saudi Arabia fail to offer even token rebuttal when Iranian President Mahmoud Ahmadinejad and Venezuela’s Hugo Chavez threaten that OPEC might switch dollar reserves to the euro. Ahmadinejad recently referred to the U.S. dollar as “a worthless piece of paper”- and the Saudis remained silent.
If U.S. dollars were no longer required for oil purchases, the demand for dollars would plunge, sending the greenback into a freefall. An end of the petrodollar regime could result in dramatically higher U.S. oil prices as the dollar falls.