OTC: U.S. fuel cutbacks might not be enough

The chief economist of the Paris-based International Energy Agency told an audience at the Offshore Technology Conference today that lower U.S. demand growth pretty much doesn’t matter in terms of denting triple-digit oil prices.
Fatih Birol says China, India and the Middle East are growing enough to more than compensate for slowing or flat U.S. growth.
His message came just a few hours before oil set yet another record, rising to $122.73 in intraday trading before closing at $121.79 today on the New York Mercantile Exchange.
The reasons were little different than what has already fueled oil’s record runup — violence in oil-rich Nigeria that threatens output, growing global demand, tight supply and limited ability to pump more oil should another supply threat loom.
In 1973-74, as the U.S. faced the Arab Oil Embargo, U.S. demand fell amid high prices, Birol noted. The same thing happened when oil prices spiked in 1979-1980, setting what had been all-time highs until recent events.
But back then, China and India weren’t emerging economies with an endless thirst for energy. Now they are. What worked to bring down prices then — conservation and lower demand — won’t work so decisively now. Growth elsewhere is unfettered by the slack in the U.S., Birol says.
But one thing to keep in mind — the Chinese and Indian governments, like many others in the world, subsidize energy for their consumers. Drivers there don’t feel the same pain at the pump that Americans are feeling now, so high oil prices don’t siphon growth or change habits.