The US Consumer Strikes Back

In what can only be described as a stunning price response from American consumers, oil demand in the United States dropped by nearly 800,000 barrels a day in the first half of 2008. This is the largest drop in demand in 26 years. A full description of the data can be found in this article.

It should be noted how much oil that actually is- roughly 6,000,000,000 (six billion) gallons of crude less than we used last year. That is a stunning victory for the American economy, and is just the kind of demand destruction the major oil producers have been fearing. It is very good news.

Despite recent lower prices we think that a psychological breaking point was reached for the consumer in 2008- consumers will not return to SUV’s and wasteful ways- they will see this as time to get even more energy efficient to prepare for the next run-up in prices.