Oil Demand Is Dropping, but Prices Aren't

Newly revised statistics show that U.S. motorists have begun to drive less.

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The buzz in the energy world is that American motorists do finally seem to be responding to high prices and driving less, as reported in the Wall Street Journal (subscription required).

Carbon Tax says the new statistics are "a powerful rebuttal of the notion that gasoline use is inelastic." And the Truth about Cars cites "a shift in both perception and reality" among drivers. Blogging Stocks says "the highly improbable may be happening."

JPMorgan's Global Energy Strategy report notes that the latest figures are the result of the U.S. Energy Information Administration's making a sizable downward revision in its earliest estimates for December 2007 oil demand. Total demand fell 0.4 percent from December 2006 levels, when it earlier had looked as if there had been 2.1 percent year-over-year growth. "On a detrended, deseasonalized basis demand for [gasoline] has not shown consistent above-trend growth since early 2005," JPMorgan notes.

But the chilling news, for both motorists and the U.S. economy, is that both crude oil and gasoline prices are rising anyway.