U.S. Fuel Demand Hits 5-Year Low

U.S. oil demand in the first seven months of this year hit a five-year low compared to demand in the same period from previous years, the American Petroleum Institute (API) reported in its Monthly Statistical Report.

And while consumers are cutting back on fuel consumption, Bloomberg news reported that U.S. consumer prices jumped to a 17-year high last month, reducing the ability of the Federal Reserve to lower interest rates if the economic slowdown deepens.

Fuel Demand Hits 5-Year Low

The API reported that, for the January-through-July period this year, total petroleum deliveries (a measure of demand) fell 3.6% from a year ago, while gasoline deliveries declined more than 2%.

“The weaker demand observed for the first six months of the year continued in July,” said API statistics manager Ron Planting. “Changes in consumer behavior have essentially erased five years of growth in gasoline demand.”

For the month of July, the U.S. produced about 5.1 million barrels per day of crude oil while importing some 13.5 million barrels per day of crude oil and products. Total imports were down 3.9% for the year through July compared with the same period in 2007.

“With less demand, we’re importing less oil,” Planting said. “However, imports still represent the lion’s share of U.S. consumption. Canada is the largest of our diverse suppliers, providing us nearly as much oil as the total from all of the Persian Gulf nations.”

Consumers Prices Hit 17-Year High

The Labor Department said the consumer price index climbed 0.8%, twice as much as anticipated. The cost of living was up 5.6% in the year ended in July, the biggest surge since January 1991. So-called core prices, which exclude food and energy, also rose more than projected, Bloomberg reported.

The report may intensify the debate between those Fed policy makers that forecast inflation will slow and those concerned that price pressures will accelerate. Increases beyond food and fuel, including gains in clothing, airline fares and education, make it less likely that central bankers will be able to keep interest rates unchanged for long, Bloomberg reported.

There is “a tremendous amount of cost pressure here that is affecting many, many industries,” William Poole, the former St. Louis Fed president, said in an interview with Bloomberg Television

Commodity costs, however, have retreated since mid-July, indicating the rise in total consumer prices may slow. Crude oil futures dropped as low as $112 a barrel this week after topping $147 last month. Regular gasoline, which reached a record $4.11 a gallon on July 17, has fallen about 8%, according to AAA.

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