Wednesday, September 10, 2008
The International Energy Agency (IEA link) cut its estimate for global oil demand today based on the changes Americans are making in their lifestyles in response to high gasoline prices and the recession. North American demand fell 5.3% and 2.9% in July, part of a seven month decline in US demand. This decrease in demand may be exacerated by OPEC's reduced production: 715,000 barrels per day in August and September, reducing OPEC's production ceiling from 32.2 million barrels per day to 28.8 million barrels per day. This appears to be a response to oil prices failing towards $100 per barrel in August. IEA seemed to be warning OPEC that any attempt to maintain oil prices over $100 per barrel would likely cause long-term changes in behavior and purchasing habits undercutting oil demand in OECD countries and Asian countries, such as Taiwan, Thailand, the Phillipines and Malaysia, are reducing subsidies that have fueled demand. The extent of reduction in demand may depend upon the extent of China's supposed economic slowdown.