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Quick Hits: US Losing Thirst for Oil


Brief scrutiny of today's headlines.

The US Energy Information Administration (EIA) says domestic demand for oil in the first half of 2008 fell 800,000 barrels per day, the largest volume decline in 26 years.

High prices at the pump and a sluggish economy cut demand.

The EIA expects 2009's demand to be lower than this year's. If so, that would mark a drop in US consumption for 3 years in a row.

US oil consumption declined an average of 7,000 barrels per day last year and is expected to drop 480,000 barrels this year and another 120,000 barrels next year. The governmental agency expects U.S. demand for oil will average 20.08 million barrels a day, the lowest since 2003.

However, the drop in US demand for oil was offset by an increase of 1.3 million barrels per day in worldwide consumption in the first half of the year.

The EIA expects prices at the pump to drop lower than previously forecast. It now expects gasoline will average $3.81 a gallon in the fourth quarter compared with a record $4.11 in July.

But lower gasoline prices will be offset by higher costs for heating oil and natural gas next winter. Residential heating oil is expected to average $4.34 a gallon, up 31% from last year. Households heating with natural gas will pay an average of $15.58 per thousand cubic feet, about 22% more than last winter.

A barrel of oil recently fetched $114.70 on the New York Mercantile Exchange, down about 22% from the high of $147.27 on July 11.

But the decline in price and demand isn't causing a stampede out of oil stocks. Exxon-Mobil (XOM), Chevron (CVX), ConocoPhillips (COP), Valero (VLO), Sunoco (SUN) and Hess (HES) were up in early trading.
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