President George W. Bush spoke on energy and economic issues Tuesday, July 29, 2008 at the Lincoln Electric Company in Euclid, Ohio.

The fall in US oil consumption in the first half of 2008, reflecting slower economic growth and the impact of high prices, was the largest half-year consumption decline in volume terms in the last 26 years, when, in the first half of 1982, consumption dropped by nearly 800,000 barrels per day (bbl/d).

The Energy Information Administration (EIA) of the US Department of Energy, said on Tuesday in its Short Term Energy Outlook, that prospects for improved oil market fundamentals over the next 18 months point to an easing in the market balance and price weakness over the near term.  The combination of slower US and global oil consumption growth, increased production capacity for crude oil and natural gas liquids in the Organization of the Petroleum Exporting Countries (OPEC) beginning in the third quarter 2008 and continuing through 2009, and higher non-OPEC supply, raises the prospect for a drop in demand for OPEC crude oil and an increase in surplus capacity.  Downward price pressures would increase if the economic slowdown proves deeper or longer than expected, and if higher prices lead to lower consumption and lower demand for OPEC crude than currently anticipated.  

Also on Tuesday, the Paris-based International Energy Agency (IEA) - the energy adviser to 27 developed countries including Ireland - said that the fundamentals of the oil market are easing thanks to a combination of slower demand growth and record production from OPEC.

In trading on the New York Mercantile Exchange Wednesday, light sweet crude is priced at $113.08 a barrel, up 7 cents from Tuesday's close. In London, Brent crude September futures have fallen to $111.55 down $1.12. The price in New York had hit an intraday record high of $147.27 a barrel in July.

The IEA warned on Tuesday in its August Oil Market Report (only available via subscription - July summary online) that even if “any fall from recent peaks is welcome,” the current price close to “$115-$120 a barrel remains high by any measure, sustaining inflationary concerns, not least in developing importer countries.”

The agency also said that it was “too early to cite definitively a sea change in the market”, signalling that crude and product inventories in rich countries rose in the second quarter of the year at their lowest rate in more than 25 years.

The IEA cut its global oil demand growth to 790,000 barrels a day, down from July’s estimate of 890,000 b/d.

The US EIA said in its Short Term Energy Outlook that preliminary data indicates that global consumption rose by roughly 500,000 barrels per day (bbl/d) during the first half of 2008 compared with year-earlier levels, as a 1.3-million bbl/d rise in consumption outside of the Organization for Economic Cooperation and Development (OECD) was partially countered by an 800,000 bbl/d drop in US consumption compared with year-earlier levels.  The decline in U.S. consumption in the first half of 2008, reflecting slower economic growth and the impact of high prices, was the largest half-year consumption decline in volume terms in the last 26 years, when, in the first half of 1982, consumption dropped by nearly 800,000 bbl/d. 

Total world oil consumption is expected to grow by a little over 1 million bbl/d during the second half of 2008 and by almost 1 million bbl/d in 2009 compared with year-earlier levels. The projection for 2009 consumption is about 460,000 bbl/d lower than last month's assessment, reflecting lower expectations for consumption in the United States and other OECD countries.  Over the next year and a half, lower OECD consumption is expected to be more than offset by continued non-OECD consumption growth, led by China, the Middle East, Latin America, and India (World Oil Consumption).  Further consumption declines in the OECD nations, coupled with the move to reduce subsidies in large parts of the developing world, should limit future world consumption growth.

EIA estimates that members of the Organization of the Petroleum Exporting Countries (OPEC) earned $671 billion in net oil export revenues in 2007, a 10 percent increase from 2006. Saudi Arabia earned the largest share of these earnings, $194 billion, representing 29 percent of total OPEC revenues. On a per-capita basis, OPEC net oil export earning reached $1,137, a 8 percent increase from 2006. Through July, OPEC had earned an estimated $642 billion in net oil export earnings in 2008. Based on projections from the EIA August 2008 Short Term Energy Outlook, OPEC net oil export revenues could be $1,174 billion in 2008 and $1,228 billion in 2009.