In an oil-driven world, the slick thing is a good proxy for the state of the global economy. It’s an interesting reversal: Instead of oil prices limiting economic growth, it’s the latter that is now determining the flow of oil.
In its latest monthly estimate, Paris-based International Energy Agency (IEA) has concluded that world oil consumption will fall for the second consecutive year in 2009, the first time in 26 years since 1982-83.
IEA has cut its forecast of oil consumption for the year by one million barrels a day to 85.3 million barrels a day.
The agency revised its estimate on the likelihood of the International Monetary Fund and other agencies revising their forecasts of global economic growth.
This is a marked change from the pessimistic days of July when oil touched $147 (Rs7,174 today) per barrel and was widely considered the limiting factor to growth in a “post-peak oil” world.
Will oil flow the other way? It will, as soon as confidence in future economic prospects is restored. Its limited supply in the world will ensure that.