Global Economic Outlook and Petroleum Overview

Economic Outlook


The recent dramatic deterioration in the outlook for economic growth in the United States and the rest of the world has led to a significant reduction in the assumptions for world economic growth and projections of energy demand and prices.  World real gross domestic product (GDP) growth is projected to slow from about 4 percent in 2006 and 2007 to about 2.5 percent this year and 1.8 percent in 2009.  Last month it was assumed world GDP would increase by 3.0 percent in 2008 and by 2.8 percent in 2009.  Previous lows for world economic growth were 0.3 percent in 1982, 1.7 percent in 1993, and 1.5 percent in 2001.

The year-over-year changes in U.S. real GDP last month were 1.8 percent growth in 2008 and 0.8 percent growth in 2009.  U.S. real GDP growth in the current month has been lowered to 1.3 percent for 2008 and is projected to decline by 1.4 percent in 2009.  The 2009 average unemployment rate has been raised from 6.2 percent to 7.9 percent in this forecast.  The U.S. manufacturing production index was lowered by 1.1 percent and 7.0 percent for 2008 and 2009, respectively, with the 2009 growth rate of the index falling from a positive 0.5 percent (growth) to negative 5.5 percent (decline).

Global Petroleum Overview

Rising prices, especially the high oil prices in the first half of 2008, and slowing global economic growth have caused oil demand growth to slow dramatically.  The recent announcement by the Organization of the Petroleum Exporting Countries (OPEC) to lower its production target by 1.5 million barrels per day (bbl/d), effective November 1, is aimed at offsetting this lower oil demand and stabilizing prices at or above recent levels.  OPEC members plan to meet again in Algeria on December 17 to review market conditions.

Future price levels will primarily depend on the magnitude and duration of the economic downturn as well as OPEC and non-OPEC behavior.  The current expectation of future oil prices assumes that the OPEC production cut may limit, but not reverse, the recent sharp fall in oil prices.  EIA projects oil prices to remain relatively flat, averaging $60 to $65 per barrel throughout 2009.  The condition of the global economy is expected to remain the most important factor driving world oil prices.

Consumption.  World oil consumption is projected to increase by almost 100,000 bbl/d in 2008 and to remain virtually flat in 2009.  In both years, growth in countries outside of the Organization for Economic Cooperation and Development (OECD) especially China, Latin America, and oil-exporters in the Middle Eastoffset projected sharp declines in oil consumption in OECD countries.  Between 2007 and 2009, non-OECD oil consumption is projected to rise by 2.3 million bbl/d compared with a decline of 2.2 million bbl/d in the OECD.  We expect economic growth in non-OECD countries not to fall as precipitously as in the OECD countries, with the non-OECD countries maintaining modest oil demand growth. 


  • The current U.S. and global economic downturn has led to a decrease in global energy demand and a rapid and substantial reduction in crude oil and other energy prices.  As a result, projections for both energy demand and prices are considerably lower than last month. 
  • The monthly average price of West Texas Intermediate (WTI) crude oil fell from over $133 per barrel in July to about $77 per barrel in October, indicative of the abrupt decline in world petroleum demand growth.  The annual average WTI price is now projected to be $101.45 per barrel in 2008 and $63.50 in 2009. 
  • The average U.S. prices for regular-grade gasoline and diesel fuel, at $2.22 and $2.94 per gallon respectively on November 10, were both more than $1.80 per gallon below their highs in mid-July.  With a weak economy continuing through most of 2009, along with lower projected crude oil prices, the annual average retail gasoline and diesel prices in 2009 are projected to be $2.37 and $2.73 per gallon, respectively. 
  • Residential heating oil prices during the current heating season (October though March) are projected to average $2.75 per gallon, a reduction of about 17 percent from the 2007-2008 heating season.  Residential propane prices are projected to average $2.22 this winter, a decrease of 10 percent from last winter.  Residential natural gas prices are projected to average $13.02 per thousand cubic feet (Mcf), an increase of 2 percent from last winter. 
  • The impact of the economic downturn on demand is also lowering current and expected natural gas prices. The Henry Hub natural gas spot price is projected to average $9.27 per Mcf in 2008. The projected 2009 annual average Henry Hub price is $6.82 per Mcf compared with $8.17 previously.


Source: EIA





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