June 9, 2008 by Allen
The U.S. Energy Information Administration (EIA) reported today that oil demand fell 8.5% between January and February this year. It also reported that gasoline consumption fell by 6.2%. Some of the decline is do to February being a shorter month, although 2008 was a leap year.
The more important point about this data is that it revises, by a huge amount the prior estimate of the oil demand fall. Previously the EIA had estimated the fall at about 3%, so the revised total marks a 5 percentage point increase. Did high oil prices contribute to the greater drop? Of course. All the talk about demand not being destroyed by high oil prices was based on estimates. Now that the final data is in, demand has clearly been impacted. Of course we only know that after the fact.
Without geopolitical pressures and the weaker U.S. dollar propping up oil prices, we would be looking at significantly lower oil prices. Stay tuned as prices will not be able to stay elevated in the face of falling demand. It is only a matter of time.
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