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NEW YORK8/10/2000 -- Record-high gasoline prices early this summer chased buyers away from the pumps and are helping to push U.S. petroleum-products demand down this year, in the first year-to-year decline since 1991, government forecasters said.
The drop in oil demand follows year-to-year demand growth of more than 600,000 barrels a day, or 3.2%, in 1999 and average growth of more than 350,000 b/d over the past eight years.
The U.S. Energy Information Administration, in a forecast released Tuesday, said it now projects the U.S., the world's largest oil-consuming nation, will use 19.49 million b/d in 2000, down a slight 0.2% from record demand of 19.52 million b/d in 1999. In early June, EIA was projecting demand in 2000 would set a record, at 19.63 million b/d.
U.S. oil demand last registered no growth in 1995, EIA data show.
Record-high gasoline prices in mid June - peaking near $1.69 a gallon nationally and climbing above $2 for some grades in the Midwest - stunted demand, EIA said. Average prices were near $1.15 a gallon a year earlier.
Latest government figures show that through Aug. 4, gasoline demand is down 100,000 b/d, or about 1.2% from a year ago, to 8.277 million b/d.
Sluggish Summer For Gasoline Demand
In the last four weeks, EIA said, gasoline demand is down more than 250,000 b/d, or 2.9%, at 8.645 million b/d, as the peak summer season continues sluggishly compared with the record year-ago pace.
EIA now expects gasoline demand to average 8.41 million b/d this year, down slightly from the record 8.43 million b/d level of a year ago. EIA had forecast in March that 2000 gasoline demand would rise by 1.7% and last month was still forecasting growth of 0.95%, or about 80,000 b/d.
"Our below-normal growth expectations for gasoline demand...have apparently been surpassed, suggesting that the price elasticity of demand for gasoline, while remaining small in the short term, is alive and well," EIA said.
EIA said retail gasoline prices fell in July to an average of $1.55 a gallon, down 8 cents from June's monthly average. Prices in August are expected to go below the July level, and EIA projects December prices will be around $1.33 a gallon, down 30 cents from the June average.
While demand for gasoline is weak and prices are now moving lower, EIA projects the opposite scenario heading into the winter heating season.
"Strong demand for diesel fuel, coupled with low inventories for distillate, will exert upward pressure on distillate fuel prices when the heating season begins in October," EIA said.
Distillate stocks (diesel fuel and home-heating oil) usually grow in the summer, ahead of the peak demand period, but stocks remain low. Total distillate stocks, as of Aug. 4, are 20% below year ago levels, while stocks of high-sulfur variety, used for home-heating, are nearly 39% under year-ago levels, while distillate demand is running 1.9% ahead of the year-ago pace.
Risk Of Winter Heating Oil Price Shock
"There is a risk of price spikes similar to last winter in the Northeast for heating oil as well as for diesel fuel if inventories are not built to adequate levels by the end of the year," EIA warned.
"We are projecting that distillate inventories will grow through November and, by the middle of the winter, the levels will be tight but somewhat higher than those of last year," the agency said. "Still, these projected stock levels will not leave much of a buffer if the winter in the Northeast is unusually cold."
Residential heating-oil prices are expected to average around $1.15 a gallon in the fourth quarter, up about 15 cents from a year ago, EIA said.
EIA said it expects demand for petroleum products from the electric power sector this year to be the lowest ever, eclipsing the weak 1995 level. EIA blamed milder-than-normal weather patterns and higher fuel costs for the drop in demand.
EIA projects, though, that U.S. oil demand will rebound in 2001, as it expects crude oil prices to come down. That means the U.S. won't experience two straight years of decline in oil demand as it last did in 1990 and 1991 when Gulf War oil-price spikes contributed to the economic recession.
The monthly price of crude imported to the U.S. was $27.70 a barrel in July and EIA projects this will fall to $25 by the end of summer because of increased supplies from members of the Organization of Petroleum Exporting Countries.
The $25 level translates to a price of near $27 for U.S. benchmark West Texas Intermediate crude, which is now trading above $30.
The figure also equates roughly with OPEC's $25 target price for its basket of crudes.
Led by Saudi Arabia, OPEC has moved to increase supplies, in large part because of concerns - now apparently verified by EIA projections - that sustained high prices will damage oil demand.
EIA forecasts that the price of imported crude will "gradually decline in 2001, and average about $22 per barrel, more than $5 below the annual average for 2000."
U.S. oil demand is expected to rebound to a record 19.98 million b/d in 2001, a jump of 2.6% from the expected level for this year, according to EIA.
Gasoline demand is expected to climb to a record 8.59 million b/d in 2001, up 2.1%, while set a record 3.71 million b/d, up 2.5%.
The drop in oil demand follows year-to-year demand growth of more than 600,000 barrels a day, or 3.2%, in 1999 and average growth of more than 350,000 b/d over the past eight years.
The U.S. Energy Information Administration, in a forecast released Tuesday, said it now projects the U.S., the world's largest oil-consuming nation, will use 19.49 million b/d in 2000, down a slight 0.2% from record demand of 19.52 million b/d in 1999. In early June, EIA was projecting demand in 2000 would set a record, at 19.63 million b/d.
U.S. oil demand last registered no growth in 1995, EIA data show.
Record-high gasoline prices in mid June - peaking near $1.69 a gallon nationally and climbing above $2 for some grades in the Midwest - stunted demand, EIA said. Average prices were near $1.15 a gallon a year earlier.
Latest government figures show that through Aug. 4, gasoline demand is down 100,000 b/d, or about 1.2% from a year ago, to 8.277 million b/d.
Sluggish Summer For Gasoline Demand
In the last four weeks, EIA said, gasoline demand is down more than 250,000 b/d, or 2.9%, at 8.645 million b/d, as the peak summer season continues sluggishly compared with the record year-ago pace.
EIA now expects gasoline demand to average 8.41 million b/d this year, down slightly from the record 8.43 million b/d level of a year ago. EIA had forecast in March that 2000 gasoline demand would rise by 1.7% and last month was still forecasting growth of 0.95%, or about 80,000 b/d.
"Our below-normal growth expectations for gasoline demand...have apparently been surpassed, suggesting that the price elasticity of demand for gasoline, while remaining small in the short term, is alive and well," EIA said.
EIA said retail gasoline prices fell in July to an average of $1.55 a gallon, down 8 cents from June's monthly average. Prices in August are expected to go below the July level, and EIA projects December prices will be around $1.33 a gallon, down 30 cents from the June average.
While demand for gasoline is weak and prices are now moving lower, EIA projects the opposite scenario heading into the winter heating season.
"Strong demand for diesel fuel, coupled with low inventories for distillate, will exert upward pressure on distillate fuel prices when the heating season begins in October," EIA said.
Distillate stocks (diesel fuel and home-heating oil) usually grow in the summer, ahead of the peak demand period, but stocks remain low. Total distillate stocks, as of Aug. 4, are 20% below year ago levels, while stocks of high-sulfur variety, used for home-heating, are nearly 39% under year-ago levels, while distillate demand is running 1.9% ahead of the year-ago pace.
Risk Of Winter Heating Oil Price Shock
"There is a risk of price spikes similar to last winter in the Northeast for heating oil as well as for diesel fuel if inventories are not built to adequate levels by the end of the year," EIA warned.
"We are projecting that distillate inventories will grow through November and, by the middle of the winter, the levels will be tight but somewhat higher than those of last year," the agency said. "Still, these projected stock levels will not leave much of a buffer if the winter in the Northeast is unusually cold."
Residential heating-oil prices are expected to average around $1.15 a gallon in the fourth quarter, up about 15 cents from a year ago, EIA said.
EIA said it expects demand for petroleum products from the electric power sector this year to be the lowest ever, eclipsing the weak 1995 level. EIA blamed milder-than-normal weather patterns and higher fuel costs for the drop in demand.
EIA projects, though, that U.S. oil demand will rebound in 2001, as it expects crude oil prices to come down. That means the U.S. won't experience two straight years of decline in oil demand as it last did in 1990 and 1991 when Gulf War oil-price spikes contributed to the economic recession.
The monthly price of crude imported to the U.S. was $27.70 a barrel in July and EIA projects this will fall to $25 by the end of summer because of increased supplies from members of the Organization of Petroleum Exporting Countries.
The $25 level translates to a price of near $27 for U.S. benchmark West Texas Intermediate crude, which is now trading above $30.
The figure also equates roughly with OPEC's $25 target price for its basket of crudes.
Led by Saudi Arabia, OPEC has moved to increase supplies, in large part because of concerns - now apparently verified by EIA projections - that sustained high prices will damage oil demand.
EIA forecasts that the price of imported crude will "gradually decline in 2001, and average about $22 per barrel, more than $5 below the annual average for 2000."
U.S. oil demand is expected to rebound to a record 19.98 million b/d in 2001, a jump of 2.6% from the expected level for this year, according to EIA.
Gasoline demand is expected to climb to a record 8.59 million b/d in 2001, up 2.1%, while set a record 3.71 million b/d, up 2.5%.