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Monday, July 28, 2008

Oil: Demand Destruction

by Calculated Risk on 7/28/2008 09:39:00 AM

From the DOT: Nearly 10 Billion Fewer Miles Driven in May 2008 than May 2007 Seven-Month Decline in Travel Reflected in Highway Trust Fund

Secretary Peters said that Americans drove 9.6 billion fewer vehicle-miles traveled (VMT) in May 2008 than in May 2007, according to the Federal Highway Administration data. This is the largest drop in VMT for any May ... and is the third-largest monthly drop in the 66 years such data have been recorded. Three of the largest single-month declines - each topping 9 billion miles - have occurred since December.

VMT on all public roads for May 2008 fell 3.7 percent as compared with May 2007 travel, the Secretary added, marking a decline of 29.8 billion miles traveled in the first five months of 2008 than the same period a year earlier. This continues a seven-month trend that amounts to 40.5 billion fewer miles traveled between November 2007 and May 2008 than the same period a year before, she said.
U.S. Vehicle Miles Click on graph for larger image in new window.

This graph shows the the moving 12 month total for vehicle miles driven.

The miles driven (on a rolling 12 month basis) is just starting to decrease - similar to what happened during the oil crisis of the '70s.

And from the NY Times: Fuel Subsidies Overseas Take a Toll on U.S.
The oil company BP, known for thorough statistical analysis of energy markets, estimates that countries with subsidies accounted for 96 percent of the world’s increase in oil use last year — growth that has helped drive prices to record levels.
China raised gasoline and diesel prices on June 21, though still keeping them below world levels. World oil prices plunged more than $4 a barrel within minutes on the expectation that Chinese demand would slow.
Indonesia spends more on fuel subsidies, $20 billion this year, than any country except China. Some economists estimate that fuel use in Indonesia would fall by as much as a fifth if the government were to eliminate subsidies entirely.
Malaysia’s government incited public anger on June 4 when it raised gasoline prices by 40 percent. ... Before adjusting the prices, Malaysia was spending 7.5 percent of its entire economic output on fuel subsidies, a greater share than any other nation. Indonesia follows with 4 percent.
Further reductions in these subsidies would reduce demand, and lower world oil prices.