Ok, the thing to focus on here is the short, bright red line to the left of the chart – for 2008, heading down from +4 per cent to -4 per cent, in little more than a month.
The data comes from FT Alphaville’s favourite chartist, John Kemp of Sempra Metals, who reckons he has found clear evidence that high prices and recession are reducing the demand for oil in the US. Says Kemp, in a note to clients on Friday:
For most of the last four years, commentators have insisted high prices would not result in “demand destruction” and oil demand was now more or less insensitive to prices even at record levels. Most of the easy substitution and conservation had already been done in the 1980s and 1990s. Petroleum products had been largely phased out of the power generation stack. The remaining demand was linked to transportation – where there were few opportunities for substitution and little appetite for conservation.
But the drop in oil demand is now undeniable.
The total volume of petroleum products supplied to the domestic market (refinery production + imports – exports – inventory build) averaged just 20.676 million b/d in the four weeks ending Feb 15.
Total products supplied was down -4.22% compared with the same four week period in 2007 (21.590 million b/d) and down -1.1% compared with three years ago in 2005 (20.906 million b/d).
In fact, the total volume of product supplied understates the actual amount of conservation because the population of the United States has expanded significantly in the last few years owing to immigration and the high birth-rate among some first-generation immigrant communities. The combined effect has added roughly +1% to the population of the United States each year, and roughly the same amount to the working-age population (18-64 years).
So product supplied ought to have been rising about +1% per year or +3% in the last three years just to keep pace with population increase. Instead, total product supplied is down -1.10% since 2005. Gasoline supplied has risen (+1.67%) but less than the population increase, while distillate supplied has been flat (-0.08%). Per capita consumption of crude oil and products is falling sharply. Fuel conservation seems to have started in H2 2006 and intensified since the start of 2007 in response to the surge in crude oil prices above $60 per bbl.