IEA cuts world oil demand view
Says there are "strong" indications higher prices depressing demand
By Steve Goldstein, MarketWatch
Last Update: 4:00 AM ET Nov 13, 2007
LONDON (MarketWatch) -- The International Energy Agency on Tuesday cut
its estimate of world oil demand for this year and next, saying there are signs
that oil prices close to $100 a barrel are depressing demand.
The Paris-based energy agency said it's cut its estimate for fourth-quarter
demand by 500,000 barrels a day, given higher prices, weaker-than-expected
economic data from the U.S. and the former Soviet Union and delays to European
heating oil restocking.
It also cut its estimate for 2008 demand by 300,000 barrels a day. The
estimate of reduced demand from the West's top energy watchdog comes just days
ahead of a gathering by the Organization of Petroleum Exporting Countries this
weekend in Riyadh to discuss the impact of a slowing global economy and the
weak dollar, in which Saudi Arabia may push for expanded output.
The IEA discussed at length in its monthly report the impact of $100 oil.
"From a practical standpoint, hitting a round number may not confer any
specific damage, but the cumulative $70 rise in price since 2002 is, we
believe, having a cumulative effect," it said.
"While short-term price effects are generally measured relative to sustained
annual price increases, the recent dramatic price rise is having a 'short-term'
shock effect, at the same time as consumers appear to be adapting behavior to
deal with steady annual price increases," the agency added.
In the U.S., it noted, the share of household expenditure on transportation
fuels has risen to the highest levels since the mid-1980s.
That said, a return to normal weather should spur growth in heating fuel
demand next year in industrialized countries, the IEA said.
And the real driver of 2008 demand should come from emerging economies, where
"growth patterns are expected to be similar to the past two years," except in
Russia and neighboring states.
"The mature economies are only supporting actors in our global demand growth
projections," the IEA said.
"Ultimately, whether $100 oil proves a turning point in consumer and
government thinking towards energy efficiency is more significant than its
direct impact on oil demand growth."
On the supply side, indications of higher output from Saudi Arabia, Iraq and
Nigeria have capped further oil price gains, it said.
Steve Goldstein is MarketWatch's London bureau chief.
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