Slump in demand should offset peak oil

Rising fuel costs are already cutting down on drive time, and a look back at the “70s energy shock shows us the extent of the possible cutback

Warnings that the supply of oil has peaked have supported the meteoric rise in the price of oil and gasoline this past year. But amid the clamor, less attention is being paid to the concept of peak demand


* Demand is moderating at a time when supply is accelerating.

* The decline in the dollar appears to be over.

* Both U.S. presidential candidates have come out in strong support of the development of alternative sources of energy and higher gas mileage requirements for automobiles.

It may seem unfathomable that demand for oil could already be pulling back, yet the number of vehicle miles driven in the U.S. fell during the month of March, for the first time since 1979. The March drop was estimated to be a remarkable 4.3% from the year-earlier level. The number of miles driven has continued to fall since then, declining by 1.8% in April and 3.7% in May. Given that transportation accounts for about 65% of all oil usage in developed nations, such changes in driving habits are perhaps the most important indicator of future oil consumption.

Financial Week