More evidence of demand destruction in advanced economies emerged Aug. 5 when a closely watched survey of consumer habits by the Office of National Statistics showed that 42% of adults in the UK had cut back on non-essential travel in vehicles in response to higher costs.
The survey showed that 51% were now using less gas and electricity in response to the rising costs of living and commodities. The UK is the world's sixth largest economy and under normal conditions consumes about 280 million barrels of oil annually in the form of transport fuels to power its fleet of almost 40 million vehicles, according to official government figures.
Crude oil prices have fallen in recent weeks amid growing signs that surging global inflation and slowing economies will hit demand growth. The front-month contracts for both ICE Brent and NYMEX crude have shed around $10/b in the week alone.
Signs of possibly weakening UK demand come as the Bank of England warned inflation in the UK could close the year above 13% and enter a deep economic recession. Although a small participant in terms of global oil consumption, the stresses impacting the domestic transport fuels market are indicative of wider global concerns about demand now outweighing worries over spare capacity and drained stocks.
OPEC agreed Aug. 3 to a modest supply increase of 100,000 b/d to its allotted output despite lobbying by the US and the majority of the alliance's producers pumping close to full capacity.
Across Western Europe, gasoline and middle distillate demand has only just recovered to prepandemic levels of 1.8 million b/d and 5.6 million b/d, respectively, Platts Analytics estimates. However, regional demand for the fuels -- which peaked in 1992 and 2006, respectively -- is seen falling to 1.35 million b/d and 4.7 million b/d by 2030 under a reference case scenario.