370. MORE SLACK IN DEMAND
The latest Weekly Petroleum Products Supplied stats from the EIA show another massive drop in U.S. oil consumption. Here's the figures:
July 20, 2007: 21,006kbd
July 18, 2008: 19,903kbd
That's a year-on-year drop in U.S demand of 1,103,000 barrels/day. Huge. Roughly equal to the production of a super-giant oil field, or a small producing country like Qatar, Indonesia or Azerbaijan.
Now, there's a lot of confusion on what this means for oil prices due to the classic doomer/oil-bull soundbite:
If we burn less, India and China will burn it up, no problem.OR
The less we use the more China will use. China and the other emerging economies set the price of oil now, not the US.Let's look at the figures, and see if that theory holds up. I've compiled the following Table from the BP Statistical Review 2008. For the most important regions and countries, the Table gives the average annual increase in oil consumption (in 1000s of barrels per day) for the periods 2003-2007 and 2005-2007, as well as the increase in 2007 over 2006. This Table should give you a better feel for the size of demand growth under business-as-usual conditions. (Click the table to enlarge)
As you can see from the Table, US consumption has been approximately flat over the past few years, so the steep recent drop in US consumption is a net negative for world demand growth.
A 1.1 million barrel/day drop in US demand is gigantic -- literally enough to wipe out all growth in oil consumption for the entire world, which at the moment is running at about 0.9mbd. (The current IEA forecast for 2008 demand growth is 0.89mbd. Source: July 10 OMR)
There is simply no way for China and India (who combined have average annual growth of around 0.5mbd) to overcome a 1.1mbd drop in US consumption. They simply can't grow that fast.
To conclude this post, here are some links with interesting detail on the current oil situation in China:
BEIJING, July 22 (Reuters) - China's crude oil imports from Iran in June halved from a year ago to its lowest monthly level in 18 months, contributing to the overhang of crude stored offshore in Iran, official customs data showed on Tuesday.
Iran shipped 1.176 million tonnes, or 286,000 barrels per day (bpd), of crude to China last month, 50 percent less than in June 2007, data from the General Administration of Customs showed.
This is also well below the 400,000 bpd of term volumes officially contracted for this year, and the even higher 465,000 bpd average imports of Iranian crude for the first quarter.Source
BEIJING (Reuters) - China's worsening power woes are all but guaranteed to trigger a surge in imported oil, just as they did in 2004 during the worst crisis in decades, right?
Wrong, say experts and industry sources. While the theme is familiar, the circumstances couldn't be more different, suggesting that oil bulls looking for a reason to push crude beyond $150 a barrel will need to look elsewhere.
China appears to be well-stocked with foreign fuel after 8 months of steady inventory builds that caused diesel imports to surge 9-fold in the first five months this year.Source: Unlike 2004, China oil demand unmoved by power woes