Oil prices had another volatile week in the midst of the US elections, threats from OPEC, and more bad economic news. Starting in the mid-$60s, prices made it up to $71 a barrel on Tuesday only to slide steadily for the rest of the week to close out at $61.04.
Bad economic news dominated the week. With payrolls dropping, house values sinking, retail sales dropping, and car sales plunging, the oil market naturally is taken by the notion that the demand for oil is going to drop markedly.
This week the EIA reported that overall US oil consumption is down by about 500,000 b/d or 6.7 percent compared to the same four week period last year. The decline, however, is not uniform across the range of oil products. While jet fuel consumption is down by nearly 16 percent, reflecting cuts in airline schedules, gasoline and distillate consumption now are down by 2.3 and 4.8 percent respectively. For the last few weeks, the gap between US gasoline consumption this year and last has been narrowing as average US gasoline prices have plunged by $1.85 a gallon to $2.26. Should this trend continue much longer, US gasoline consumption will soon be close to last year’s, although consumption of other petroleum products is likely to remain lower due to lessening economic activity.