WSJ:

The IEA now expects world consumption to average 84.6 million barrels a day this year, or 220,000 barrels a day less than it forecast as recently as a month ago. Nevertheless, oil use this year will be 1.2 million barrels a day higher than in 2005, when demand grew by slightly over 1 million barrels a day. While not confined to the U.S., the erosion in demand was most noticeable in America, the world’s largest market which consumes about one-quarter of the world’s petroleum and thus greatly influences oil prices.

Typically, oil use rises along with economic activity and prosperity. But a 4.8% growth in the U.S. economy in the first quarter of this year, the fastest rate in two and a half years, wasn’t reflected in oil demand growth, the IEA said. Indeed, America’s oil use fell 1.4% in the first quarter this year from a year ago. That was a greater rate of decline than in the final quarter of 2005, when America’s oil use declined 1.1% after hurricanes ripped through the Gulf of Mexico and the economy expanded by only 1.7%.

While a significant part of the decline in oil demand in the latest quarter was attributed to mild temperatures this winter, the IEA noted that the U.S. trucking and airline industries, major consumers of petroleum, were using fuel more efficiently. Airlines, for instance, reduced domestic departures and increased load factors. In China, the world’s factory floor and the second largest oil market, oil use still is rising sharply, though far below the eye-popping 15.4% rate of growth recorded in 2004. The IEA is projecting China’s oil use will grow by 5.3% this year, while its economy expands by 9% to 10%.

We thought prices were supposed to go down when these things happened; more evidence perhaps that the world has been turned on its head.

This entry was posted on Friday, May 12th, 2006 at 5:34 pm and is filed under business, China, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.