The forecast for 2008 and 2009 is bad news for energy companies and oil producing nations that depend on robust prices, but could benefit cash-strapped consumers by sending gasoline and heating costs lower, according to a US Energy Information Administration report.
World oil consumption is projected to fall by 50,000 barrels per day in 2008 and 450,000 barrels per day next year, the EIA said. The report marked the first major forecast for shrinking energy demand tied to the current global financial crisis.
The lower forecast came as the EIA revised down its projection for 2009 global economic growth to 0.5 percent next year, from the 1.8 percent projection it made in its previous report issued in November.
“The current global economic slowdown is now projected to be more severe and longer … leading to further reductions of global energy demand and additional declines in crude oil and other energy prices,” the EIA said.
The last time world petroleum demand fell was in 1983, part of four years of straight declines in oil consumption that began in 1980, the agency said.
The weak economy and lower petroleum demand has already caused US crude oil prices to sink from a record $ 147 a barrel in July to $ 43 on Tuesday – a slump that has rattled energy producing nations like Saudi Arabia, Russia and Venezuela, and triggered massive cutbacks in investment in oil projects like those in Canada’s oil sands.
“The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices,” the EIA said.
Oil prices rebound
Oil recovered more than $ 2 a barrel to rise above $ 44 on Wednesday after an overnight slump by 4 percent on grim forecasts of lower US demand.
The market is looking to Wednesday’s weekly US inventory report that may show rising crude stocks, and then to OPEC’s Dec. 17 meeting where the group is expected to cut more output.
US crude for January delivery rose $ 2.28 to $ 44.35 a barrel by 1230 GMT. On Tuesday oil fell $ 1.64, or 3.75 percent, to settle near a four-year low of $ 42.07 a barrel.
London Brent crude was up $ 2.00 at $ 43.53.
Analysts said gasoline pump purchase data in the United States on Tuesday showed its first year-on-year increase since April, with sales up 0.3 percent in the week ending Dec. 5.
The EIA slashed its 2009 forecast for crude oil prices to $ 51 a barrel from $ 63.50 a barrel in its previous forecast.
The World Bank said on Tuesday that the world financial crisis will sharply slow world economic growth next year, ending the five-year global price boom for crude oil and other commodities.
The weaker energy prices could mark a bright spot for consumers who have been hard hit by the financial turmoil.
The EIA said it cut its winter heating oil forecast to $ 2.53 a gallon from $ 2.75 a gallon, and its 2009 gasoline price forecast to $ 2.03 a gallon from $ 2.37.
Average US gasoline price are currently running about $ 1.70 a gallon, down from a record $ 4.11 this summer.
