The accelerating rise in commodities prices may leave energy behind. Even if the economy recovers next year as expected, energy consumption in the industrialized world fell so far, so fast, that it will struggle just to meet 2007 levels.
Barclays Capital estimates that oil demand in the Organization for Economic Co-operation and Development nations will actually be down 8,000 barrels a day in 2010 compared with 2007, while U.S. demand will be down by 754,000 barrels a day. The sudden price rise last year to $140 a barrel followed by economic collapse had a dramatic effect on energy consumption, from automotive fuel to electricity.
"That is a lot of demand that has been lost, that definitely will not come back in 2010," said Barclays analyst Constanza Jacazio. "Even assuming a global economic growth forecast of 4.2 per cent."
While gold prices surge to a record high and commodity metals like copper and nickel rise daily, oil has seemingly stalled out at around $77 a barrel. Natural gas prices have done worse, falling 39 per cent in the U.S. as industrial demand has declined while rich new supplies from once-useless shale rock come to the surface.
The U.S. tells the story of how the economic crisis knocked a hole in energy consumption. According to the Energy Information Administration, total energy consumption fell 6.4 per cent in the first seven months of this year below 2007 levels, to 56 quadrillion British Thermal Units. Petroleum is down 9.4 per cent to 18.8 million barrels a day - the equivalent of nearly a supertanker a day in reduced demand - and the EIA forecasts electricity demand will fall to 10.3 billion kilowatt-hours a day, down 4.6 per cent from 2007 levels.
The economy that does come back may be different than the one that collapsed. A huge increase in wind power will trim natural gas demand, says Barclays analyst Biliana Pehlivanova, as utilities shut down more expensive gas-fired plants to accommodate the new supply. She's forecasting an increase of industrial demand of 0.8 billion cubic feet a day, not enough to overcome the 1.3 bcf decline in 2009.
Adding to the woes of natural gas producers, the new supply of shale gas, obtained by drilling horizontally through shale rock, is proving to be larger and longer-lived than many expected. Supply is holding up even after the number of drilling rigs in service has plunged 31 per cent to around 1,750, the lowest levels since 2002.
Cash for Clunkers may accelerate the steady increase in fuel economy of U.S. vehicles, which is above 17 miles per gallon now.
Balancing this is the expected increase in consumption by non-OECD countries, which will use some 46 per cent of world oil supplies next year. The OECD forecasts developing nations, led by China, will account for 90 per cent of the increase in global energy demand through 2030.
The International Energy Agency forecasts the global oil demand will increase by 1.3 million barrels a day next year, driven by developing-nations recovery. That won't be enough to overwhelm supplies and drive up prices, however, says Ms. Jacazio of Barclays. Saudi Arabia and other OPEC nations have added about 5 million barrels a day of excess pumping capacity and will step in to prevent a price spike like last year's rise to $140 a barrel, which may have contributed to the subsequent economic collapse.
The shortage of new drilling projects will eventually drive up prices, she says, but not next year.
"We see oil trading in a narrow range with a slight bias to the upside," she says, perhaps as high as $85 a barrel. "We're definitely not looking for anything like last year."