In what can only be described as a stunning price response from American consumers, oil demand in the United States dropped by nearly 800,000 barrels a day in the first half of 2008. This is the largest drop in demand in 26 years. A full description of the data can be found in this article.

It should be noted how much oil that actually is- roughly 6,000,000,000 (six billion) gallons of crude less than we used last year. That is a stunning victory for the American economy, and is just the kind of demand destruction the major oil producers have been fearing. It is very good news.

Despite recent lower prices we think that a psychological breaking point was reached for the consumer in 2008- consumers will not return to SUV’s and wasteful ways- they will see this as time to get even more energy efficient to prepare for the next run-up in prices.

As the world watches in horror at Russian aggression in the sovereign state of Georgia, the financial world is closely watching the price of energy. Rumors of a Russian attack on the Baky-Tblisi-Ceyhan pipeline did little to change the price of crude or heating oil- four weeks ago we are confident they would have sent oil prices to $200 a barrel. Keep an eye on this conflict as a key and ongoing issue that will play a role in driving energy prices in the upcoming winter months.

Today in a piece written by Jad Mouawad, the President of HEAT USA, Andrew Heaney was quoted noting the incredible volatility of heating oil prices over the summer. The article itself which you can view here, is a fairly pessimistic view on the cost of heating oil in the upcoming winter. 

As of today prices of heating oil are nearly 60 cents off of their highs this summer. This is fantastic news for conusmers, and for heating oil companies too. Speculators are running for the exits as fear that demand is drying up has replaced fear that supply was drying up.

As recently as early July, you couldn’t convince anyone that oil prices were going anyplace but up. In our experience that is the precise moment when they come down. Let’s hope the trend continues…

Wholesale heating oil prices have fallen dramatically over the last 10 days or so- falling almost 50 cents per gallon. The situation is awkward for some heating oil companies who have been doing lock-ins/caps/pre-buys, as the prices offered look (for the moment) to be insanely high.

Right now, HEAT USA members are looking at prices that are in most cases about 50 cents lower than prevailing retail prices. The situation is fluid of course, and winter weather is a long way away, but it does feel good to see prices fall for once doesn’t it?

A great article on Bloomberg today outlining how Washington aims to curb abuses by speculators in the energy markets. There are lots of opinions swirling about how much of an impact energy traders have been having on the current cost of crude.

Interesting side note however- as the prospect of these bills getting passed seems brighter, the price of crude oil has plummeted more than $12 IN A WEEK. Hmmmm. Maybe there is something to this whole oil speculation thing. Party is over boys! Time to find a new way to put the screws to us.

American Airlines recently announced that it is grounding nearly 10% of its fleet. Many other airlines have begun to follow suit. American was also the first to adopt the $25 fee per bag policy, which other airlines followed. Overall airlines are flying fewer planes, fewer flights, and the flights they are flying are carrying much lighter payloads and flying at slower speeds.

What does this have to do with heating oil? Jet fuel is a souped-up version of diesel fuel, or if you like,  a very souped-up version of heating oil. They are made from a lot of the same things produced by the refineries. If demand for jet fuel goes down, which we know is happening right now, this might take a little bit of the pressure off of diesel and heating oil.

Crude oil took an absolute dive in early trading today. This coincided with OPEC making gloomy statements about drop in crude demand globally. Perhaps in the midst of lighting cigars with hundred dollar bills they forgot that outrageously high prices tend to convince the global consumer to cut back (see our posting on HEAT members dramatic conservation below).

‘Demand destruction’ as the Wall Street types call it, is real and happening because the American consumer is in a very bad mood.

Usually a sleepy month in the heating oil industry, July is setting new records for new applications for membership in HEAT USA. Given current high oil prices, this shouldn’t be much of a surprise, but today alone we signed up nearly 40 new members. That is really unheard of for a day in July, when new applications fall to a trickle, and then begin to pick up in mid-August.

In a bit of rare good news for energy consumers, Senator Charles Schumer (D-NY) and Senator Judd Gregg (R-NH) each proposed over the weekend that LIHEAP funding be increased by as much as $2.5 billion. This is an expensive but very necessary measure to keep those with low or fixed incomes safe and warm for the winter. Contact your local representative if you want to express your support.