The warnings may finally be coming true. Four months after the OECD warned that the soaring oil price could damage the economic recovery in developed nations (since when Brent has advanced another 19 per cent), the IEA has noticed that global oil demand has begun to flatline.
In its March Oil Market Report, it notes the first month of near-zero growth since the summer of 2009, which was just as the recovery was getting under way.
Part of the decline in demand is because of the Japanese refinery capacity which was knocked out by the earthquake and tsunami.
But, significantly, demand has also dipped in North America. The IEA has downgraded its forecasts for 2011 demand in the region from a growth of 26,000 barrels per day to a fall of 194,000 b/d.
With petrol prices pushing $4 a gallon, which is where it was just before the 2008 crash, this remains the major worry, the IEA says:
$4/gallon (€0.73/litre) gasoline is likely to yield an anaemic US driving season. This is the main change to our demand forecast – a weaker 2011 profile in North America.
It may be that prices react just in time. Ib the last few weeks we have seen Brent fall from a peak of over $125 to closer to $110. Some analysts thought the fall was triggered by poor economic data. What the IEA’s report makes clear is that without a steeper fall soon, the economic data could get a lot worse.