With global oil consumption having decreased relative to year-earlier levels in every quarter since the middle of last year, we have now experienced four consecutive quarterly declines in world oil use, with another decline expected in the current quarter. This is an unusual situation, as declines in global oil consumption over that long a period have occurred only twice before over the past 50 years, in the mid-1970s and the early 1980s.
The current decline in world oil consumption reached its nadir during the first quarter of 2009, when world oil consumption declined by about 3.5 million barrels per day (bbl/d) year-over-year (see the chart below). The Organization for Economic Cooperation and Development (OECD) countries accounted for most of the decline in the first quarter this year. This pattern continued during the second quarter of 2009, and we expect declines in OECD consumption to continue throughout the year. The decline in OECD consumption continues a trend that began during the fourth quarter of 2005, marking 15 consecutive quarters (through mid-2009) of declining OECD oil consumption.
On an annual basis, EIA forecasts that world oil consumption could decline by 1.8 million bbl/d in 2009—a decline of 2.1 percent from 2008 (see the Short-Term Energy Outlook released yesterday). This decline approaches the size of the largest annual average decrease seen previously, which was a 2.2 million bbl/d decline in 1981. However, in percentage terms, the decline of 3.4 percent in 1981 was much larger than EIA expects to occur this year.
What made the total global oil consumption decline so severe earlier this year was not only the magnitude of the drop in the OECD countries, but something seen very rarely—a decline in non-OECD oil consumption. During the past half century, the only time non-OECD oil consumption declined (on an annual basis) was during 1992-1993, following the collapse of the Soviet Union. During the first quarter of 2009, virtually all regions declined, including China, which had been one of the engines of global oil demand growth in recent years.
The timing and magnitude of global economic recovery will be the key factor underpinning global oil consumption. EIA expects world GDP, on an oil-consumption weighted basis, to resume year-over-year growth during the fourth quarter of 2009. However, some regions are expected to show growth before then. For example, the Middle East region has not shown a decline in oil consumption during the current global downturn, nor has India. Chinese oil consumption showed renewed growth during the second quarter 2009, due, in part, to the strong Chinese economic growth during that quarter, and we expect this growth to continue. EIA expects this growth in oil consumption in the non-OECD countries to yield a resumption of global oil demand growth, with gains in the non-OECD countries outweighing declines in the OECD countries by the end of the year.
As we move into 2010, EIA expects that demand growth will continue, with global oil consumption projected to increase by 0.9 million bbl/d over 2009 levels. This growth will be led not only by the non-OECD countries, where nearly every region is expected to show growth in oil consumption, but also by the United States, where oil consumption has been declining since mid-2007. But how quickly and how significantly global oil demand rebounds will depend in large part on the pace of the global economic recovery.
Diesel Price Falls
The U.S. average price for regular gasoline slipped for the fourth week in a row, dropping two and a half cents to $2.59 per gallon. The national average was $1.06 below the price last year. With the exception of the West Coast, prices dropped throughout the country. On the East Coast, the average price slipped nearly two cents to $2.58 per gallon. The price in the Midwest dropped the most of any region, falling nearly six cents to $2.46 per gallon. The average price on the Gulf Coast remained the lowest of any region, dropping five cents to $2.41 per gallon. In the Rocky Mountains, the average slipped two cents to $2.60 per gallon, remaining $1.17 below a year ago. The West Coast was the only region where the price increased, moving up about five cents to $3.00 per gallon. Although the price was $0.81 below a year ago, it was the first time that the price in the region was as high as $3.00 since October 27, 2008. The price in California jumped six cents to $3.10 per gallon.
For the first time in seven weeks, the national average price for diesel fell. The price dropped nearly three cents to $2.65 per gallon. The average price was $1.41 below last year as diesel prices slipped throughout the country. On the East Coast, the average dipped three cents to $2.66 per gallon, $1.44 below a year ago. The Midwest price fell two cents to $2.63 per gallon. Dropping more than four cents, the most among the major regions, the average on the Gulf Coast remained the lowest of any region at $2.58 per gallon. The smallest drop took place in the Rocky Mountains, where the price slipped a penny to $2.68 per gallon. On the West Coast, the average dropped two cents to $2.79 per gallon. In California, the average moved down three cents to $2.87 per gallon.
Propane Stocks Resume Build
Stocks for propane grew this week after experiencing a counter-seasonal draw last week. Total U.S. propane inventories increased 1.6 million barrels to approximately 70.7 million barrels total. The Midwest region experienced the largest gain of 0.9 million barrels. East Coast inventories increased by 0.4 million barrels and Gulf Coast inventories grew by 0.3 million barrels. The Rocky Mountain/West Coast region stocks grew slightly. Propylene non-fuel use inventories sustained their share of total propane/propylene inventories at 2.8 percent.
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