Fresh data from the International Energy Agency show oil consumption in the 30 member countries of the Organization for Economic Cooperation and Development fell 0.6 percent in 2006. Though the decline appears small, it marks the first annual drop in more than 20 years among the OECD countries, which drain close to 60 percent of the 84.4 million barrels of oil used globally each day. Industrialized nations' demand tiptoed into negative territory in 2002, but the dip was so slight that it registered as flat.
Last week, U.S. benchmark oil for February delivery settled around $50, while it traded below that level for a while for the first time since May 2005. The closing price hit a 20-month low after the Energy Department said U.S. crude oil stockpiles rose the most in more than four years. Oil has been sliding since peaking above $77 in July. This year, prices have fallen 17 percent.
The tipping point when oil prices begin to erode demand was reached last summer, several industry analysts said.
The fall in oil use by the industrialized world is a sign that the reactions to higher oil prices by businesses and consumers from the U.S. to Germany to Japan may be adding up to a cycle-turning downdraft in demand.
Other signals, both economic and psychological, have been popping up for some time. Demand for gas-guzzling sport utility vehicles has been falling, while investment in and sales of alternative fuels such as ethanol are booming.
Gasoline prices in the U.S. also are falling, both because of swelling inventories and the slide in crude oil prices, which can take four to eight weeks to fully pass down to retail pumps.
Thursday, the AAA automobile club reported regular-grade gasoline below $2 a gallon in Michigan and at $2 a gallon in Missouri and Oklahoma. The Energy Information Administration of the Energy Department said the national average price of a gallon of gasoline was $2.23 as of Jan. 15. The national average may continue to fall in coming weeks, the EIA said in a weekly review published Thursday; it said prices could get close to $2 a gallon by the end of this month or early in February, noting the possibility that the national average could fall below that level.
To be sure, global oil demand grew 0.9 percent in 2006, owing to steady growth in China and the Middle East. But that was down from growth of 3.9 percent in 2004 and 1.5 percent in 2005. And the price fluctuations highlight the role played by expectations, rather than simple supply and demand, in determining the price of oil on world markets.
News of the oil-demand drop comes as the debate over how to curb energy consumption is reaching a fever pitch in the U.S., the world's biggest oil consumer.
This week, President Bush is expected in his State of the Union address to expand on a call he issued last year for the country to end its ''addiction'' to oil. In Congress, bills are circulating to impose cap-and-trade programs, which amount to putting a price on global warming emissions produced by the combustion of fossil fuels.
A lasting downdraft in oil prices would trigger a profound redistribution of wealth around the world, putting more money in the pockets of consumers in the West and ending the bonanza enjoyed by oil company investors and petro-states such as Venezuela and Iran.
Currencies of some bigger oil exporters, including the Mexican peso, have faced downward pressure in line with falling oil prices. Airlines - including British Airways PLC and Cathay Pacific Airways Ltd. - have begun removing fuel surcharges imposed on passengers. Nations with significant oil industries - including Saudi Arabia, Russia and the U.S., the top three producers - stand to take a hit to employment, profit and tax receipts in their oil sectors.
One factor that could insulate the world from a big price rebound, paradoxically, is OPEC's recent output cuts. By trimming production, the cartel has swelled the world's volume of spare oil-pumping capacity, particularly in Saudi Arabia, thus easing fears of a supply disruption in some part of the vast global oil chain.
Oil buyers are watching for signs of OPEC's next move. Some OPEC members, such as Venezuela and Iran, were clamoring for further production cuts.
