Oil consumption in Europe has been in decline for sometime as a result of falling consumption of oil by the power-generation sector, increased efficiency and conservation and relative saturation in the regional automotive market. However, weak consumer sentiment was an additional factor that lead to a sharp drop, estimated at 2.1%, in consumption in 2011. The Economist Intelligence Unit is forecasting a contraction in regional GDP this year which will further depress regional oil consumption, particularly as real incomes are expected to suffer from fiscal austerity, weak property markets and high rates of unemployment. The recent strength of the US dollar, the currency in which crude oil is traded, and the sharp rise in the oil price is likely to lead to further rises in the retail price of fuel in Europe and the UK and consumers can be expected to respond by trying to use fuel as efficiently as possible or by cutting back on non-essential travel. Even assuming that consumption growth remains strong in Asia, the overall picture is for unexciting oil consumption growth this year suggesting that international oil prices would be markedly lower were it not for the escalation in geopolitical tensions in the Middle East.
Thursday, 23 February 2012
