Drop-off in oil demand could prompt price fall - PFC

18 June 2008 11:27  [Source: ICIS news]

KUALA LUMPUR (ICIS news)--A decline in oil demand growth is likely to be fuelled by high prices, said John Paisie of PFC Energy on Wednesday, adding that there was potential for values to moderate.

“Part of the reason for strong oil prices has been greater demand growth since 2003 and 2004,” adding that the two major demand growth centres were the US and China," said Paisie, speaking at the 2nd ICIS Asian Base Oils and Lubricants conference.

“The portion of disposable income spent on oil and gasoline [in the US] is similar to that seen in the eighties, which is when we saw a large drop in demand,” Paisie said.

There are also uncertainties in emerging markets in Asia, such as fiscal pressures in India and inflationary pressures in China, which could reign in demand.

One factor in this has been the fact that consumers in China have been protected from the latest price increases by subsidies in the domestic market.

“Chinese consumers have not seen these last prices,” said Paisie, adding that it was unlikely that subsidies would be lifted before the Olympics.

“If it does happen it will impact overall economic growth and demand. Until you start to see the impact on China demand it's difficult for oil prices to come down as demand continues to grow even though oil prices are very high,” Paisie said.

“There is a potential for prices to moderate, but not below $60/bbl.”

The two-day conference organised with Petronas ends on 19 June.

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By: Shelley Kerr
+44 20 8652 3214

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