U.S. News: A Hurdle in Way of Cheaper Gas --- American Drivers Cut Back, but Overseas Demand IsLikely to Keep Prices High
806 words28 April 2011The Wall Street JournalJ A6English(Copyright (c) 2011, Dow Jones & Company, Inc.) After weeks of paying steadily more for a tank of gasoline, American drivers are beginning to ease up on thegas pedal, but in today's global economy, that might not be enough to lower crude-oil prices and give a lift toU.S. growth.
The U.S. Energy Department on Wednesday reported a 1.6% decline in a closely watched gauge of gasoline consumption, compared with a year ago. In the past, when U.S. drivers cut back, that has dentedglobal demand for oil and depressed prices. After a lag, the lower prices would help the economy regain itsfooting -- or at least remove a substantial headwind.
But many oil experts believe that scenario won't play out this time, because U.S. drivers are no longer callingthe shots. The rapidly industrializing economies of China, India, Brazil and even Saudi Arabia are. Apossible result: an extended period of sluggish U.S. growth amid high oil prices.
"It's a new world," said oil economist James D. Hamilton, a professor at the University of California, SanDiego. "The growth in newly industrialized countries is the key factor driving oil prices."
As U.S. prices for regular gasoline hit $3.88 this week, their highest level since 2008, the EnergyDepartment's report showed that the four-week average of gasoline produced by refineries was 9.1 millionbarrels a day, down 1.6% from a year earlier. It was the fifth-straight week of declining usage in this closelywatched barometer of gasoline consumption.
Oil prices, however, ticked up 55 cents to $112.76 a barrel in Wednesday trading on the New YorkMercantile Exchange.
In the past few weeks, oil prices have risen sharply amid concerns about turmoil in oil-producing nations inthe Middle East and North Africa. Analysts at Goldman Sachs believe this is adding about $10 a barrel to oilprices.
But this short-term bump is partially obscuring a longer-term development in oil markets, the surging demandfrom China and other emerging economies amid constraint in global supplies.
Economists believe that oil prices would still be above $100 even if peace broke out in North Africa and theMiddle East. A key factor: China guzzled 874,000 more barrels of oil in March than it did a year earlier, a10.6% increase despite high oil prices, notes Barclays Capital.
Since 2000, U.S. oil consumption has edged down 4% to 19.2 million barrels a day. In the same period, thecombined demand from Brazil, India, China and Saudi Arabia has risen 76% to 18.8 million barrels, nearlymatching the U.S. By itself, China has more than doubled oil consumption to 9.4 million barrels, according todata from the International Energy Agency.
"In some respects, the Chinese are pushing us into small cars so they can consume more oil," said StephenBrown, a professor at the University of Nevada, Las Vegas, and former energy economist with the DallasFederal Reserve Bank.
The U.S. economy is better able to handle the price spike than in the past. Its economy uses less oil per capita, due to a shift away from manufacturing and improved vehicle fuel efficiency. And the U.S. uses morediverse sources of energy than in the past, including a growing supply of domestically produced natural gas.But oil prices still matter. More than three-quarters of all U.S. workers drive by themselves to work in a car they fill up with gasoline or diesel refined from crude oil.
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