A tale of two countries:
In March, oil demand in the U.S. fell by 0.8 percent, compared to a year ago. For the entire first quarter, oil demand dropped by 1.4 percent, the third consecutive quarter of declining demand for crude oil in the United States.
Also in March, oil demand in China rose by 8 percent — the fastest pace in 19 months. For the entire first quarter, demand jumped by 6.2 percent.
There are extenuating circumstances: The U.S. is entering a recession, while China may be stocking up on inventory before the Olympics to avoid the embarrassing possibility of fuel shortages while the whole world is watching. But the long-term trends are striking. Energy whiz Robert Rapier points us to a Bloomberg story reporting that in 2008, “China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S.” — 20.67 million barrels a day. A key historical link between U.S. recessions and a consequent decline in the global price of oil appears to be broken. Demand might be down in the U.S., but the price of a barrel of crude hit another record on Tuesday, breaking $118.
From a peak oil/climate change perspective, the numbers are daunting. Even immense strides in conservation and fuel efficiency and development of renewable energy sources in the U.S. aren’t going to make much of an impact on the booming consumption of fossil fuels by developing countries. From an economic perspective, at least in the short term, the implications are a little more cheering — a U.S. recession may not automatically drag everyone else in the world down with it, although it’s still much too early to be sure of that.
Whatever the case, these are historic times. We are living through the third great oil shock of modern times, easily ranking with the disruptions of 1973 (the Arab oil embargo) and 1979 (the Iranian revolution). But unlike the other two, which were caused by discrete phenomena that had beginnings, middles and ends, this time around, this narrative is open-ended.