The International Energy Agency again lowered its global oil demand forecasts for 2008 and 2009 as high prices and reduced U.S. consumption lowered overall demand for crude, the organization announced Wednesday. It lowered its 2008 forecast by 100,000 barrels per day to 86.8 million barrels, and 2009 estimate by 140,000 barrels to 87.6 million barrels.
The IEA's announcement had little impact on oil prices early Wednesday as oil rose 60 cents to $104.43 per barrel. However, it should be noted that two bullish factors also affected prices Wednesday: an OPEC announcement of a commitment to existing production quotas with a pledge not to exceed them, as some cartel members have in the past; and Hurricane Ike in the Gulf of Mexico, which threatened to damage oil rigs and infrastructure as it approaches the Texas-area coastline, according to weather.com.
Oil's price surge takes a toll
Oil has declined about 30% since hitting a record high of $147.27 per barrel in July 12. Economist Richard Felson told BloggingStocks Wednesday the dip in oil's price over the past two months is not nearly enough to blot-out the process-changing affect of oil's four-year price surge.
"We do still see oil demand increases in China, India, and the eastern hemisphere, but the important thing is that demand growth appears to be moderating," Felson said. "And in the developed world, particularly the United States, we're seeing actual consumption reductions, year-over-year. These facts, plus the overall global economic slowdown, has put and will continue to put a downward pressure on prices."
Felson said he expects oil "to fall to the $80-90 range early in 2009." He added that oil's climb to record highs earlier constitutes "another oil shock, another period that has propelled a new round of efficiency efforts by businesses and consumers, including a push to develop substitute fuels."
Oil Analysis: The likely reduction of global oil demand is welcome. While the world is considerably more fuel-efficient in 2008 than it was during the first two oil shocks in 1973-74 and 1979-80, the rapid rise in oil still managed to slow growth in the U.S. and globally to unacceptably-low levels. The best tonic for the above? A lower oil price for at least two years, combined with a shift to oil substitutes, where possible, and increased efficiency throughout the economy.
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