High prices prod developed world to curb oil use

Annual consumption drops for the first time in more than 20 years

Mild winter weather has something to do with it. So does heavy selling by financial funds. But a largely overlooked factor in the recent plunge in oil prices may portend an end to the multiyear rise in crude. For the first time in years, the developed world is burning less of it.

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.

Wall St. Journal