US oil demand falls 3% in first half of 2008 - API

18 July 2008 17:42  [Source: ICIS news]

WASHINGTON (ICIS news)--First-half US oil and gasoline demand fell significantly for the first time in years as high crude prices, surging retail fuel costs and the slowing economy drove consumption down, the American Petroleum Institute (API) said on Friday.

 

The institute said that the nation’s oil consumption fell 3% in the first six months this year compared with the 2007 first half.

 

Average daily oil consumption was at 20.8m bbls/day in the six months ended 30 June - the lowest rate in five years, the institute said.

 

Among refined products, gasoline demand fell 1.7% - “the first significant decline recorded in 17 years”, according to the trade group.

 

In the second quarter this year, the decline in gasoline demand was even more pronounced, falling 2% in the April-June period.

 

“Higher pump prices and a slowing economy were undoubtedly factors,” said API statistics manager Ron Planting.

 

As demand edged down, US domestic production increased, the API said, meaning that US consumption of imported crude and refined products fell significantly.

 

“US petroleum imports sank to their lowest first-half level since 2003 at less than 13m bbls/day,” the institute said.

 

“Crude oil imports fell 2.5% from a year earlier while product imports [such as gasoline] slipped nearly 10%.

 

The institute also reported that US oil and natural gas companies completed 53% more exploratory wells in the second quarter than in the same period a year earlier, while development drilling also increased 15%.

 

Those increases “are remarkable considering the limited access our industry has to the nation’s oil and natural gas resources”, said Hazem Arafa, director of the institute’s statistics department.

 

API chief economist John Felmy said the nation’s oil and gas exploration and development companies could find and produce more of both commodities if Congress would lift its 27-year-old moratorium on 85% of US offshore areas.

 

He said that in addition to the developing reductions in US oil demand, “we also need to increase supply to bring prices down, and we hope that Congress will open access to more US resources”.

 

“Congress has chosen not to move forward on that,” Felmy said, “but we hope Congress will work to improve the supply situation.”

 

The US Congress is locked in debate over possible legislative remedies to current high crude and fuel prices.

 

The majority Democrats are opposed to new offshore drilling and argue for new regulations to increase conservation and control speculation while Republicans are pressing for access to domestic oil and gas reserves now closed to development.

 

Felmy discounted charges in Congress that market speculators are largely responsible for the sharp increases in crude pricing since the beginning of the year.

 

“If speculators were responsible, if we had an artificially high price for crude, you should see inventories accumulating, but we’re not seeing that,” he said.

 

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By: Joe Kamalick
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