Oil Demand Plummets: Good for Climate, Not So Much for Cleantech
U.S. demand for petroleum in the first three months of 2009 was the weakest in a decade as the ailing economy finally did what years of good intentions could not: make Americans spend less on oil.
The American Petroleum Institute released a report Thursday showing petroleum deliveries in the first quarter dropped 3.4 percent from the same period a year earlier, to 19.2 million barrels a day, the slowest demand for oil since 1998. That rate also marks an 8 percent drop from the record of 20.8 million barrels daily in 2005. The United States’ share of global oil consumption fell to 23 percent in the most recent quarter, compared with 25 percent in 2005.
While lower demand for oil may be welcomed by those concerned about climate change, it’s not necessarily a boon for cleantech companies, many of which have been struggling to raise cash, and others to simply stay afloat. In general, the capital needed to bring alternative energies into mainstream acceptance are hard to come by until the economy recovers.
According to API, deliveries of fuel oil such as diesel and heating oil declined 8.5 percent in the first quarter, while jet fuel dropped 7.6 percent. The only gain came for gasoline. With gas prices averaging below $2 a gallon in early 2009, less than half the record highs last summer, consumers were willing to buy more of it, with demand up 0.8 percent from the previous year.
But while consumers were spending less on petroleum fuel, oil companies remained busy as they built up inventories. Gasoline imports rose 15 percent in the first quarter to 1.14 million barrels per day. In March alone, domestic oil production rose 7.2 percent to 5.5 million barrels a day, the highest level since May 2005.
Oil companies seem to be adding to inventories in anticipation of stronger demand once the economy recovers. Crude oil inventories increased by 17 million barrels in March to the highest level since 1990. After hitting a low of 286 million barrels in December 2007, oil inventories have since risen 27 percent to hit 363 million barrels.
An economic recovery would mean a modest increase in prices. Another report this week from the Energy Information Administration forecast a rise in gas prices this summer to an average of $2.23 a gallon, with natural gas prices to follow higher in 2010. The EIA said:
Higher oil prices, as well as the change in market sentiment to a slightly less pessimistic outlook, may also reflect the market’s belief that economic recovery policies from central banks and governments have slowed down the decline in demand and even improved the chances for an economic upturn and, consequently, higher oil demand, later this year.
Somewhat paradoxically, higher demand and prices could revive interest in cleantech companies among consumers and investors, particularly for electric and hybrid vehicles. The companies that are preparing now for a recovery may be best positioned to grow once people start complaining more about high energy prices than the poor economy.
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