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…