Oil Prices Drop on International Forecast

PARIS — The International Energy Agency is forecasting that oil demand this year and next will be “lower than previously anticipated.”

The IEA Monthly Oil Market Report, released Nov. 9, caused already weak spot oil prices to drop further. December contracts for crude oil dropped to $12.21 cents a barrel, down from $13.22 the week before.

According to the Paris-based agency, global demand for this year is expected to increase by about 600,000 barrels a day, much less than originally forecast, and substantially lower than the two million barrels a day increase in 1997. For 1999, the IEA expects demand to increase only 400,000 barrels a day.

The forecast is good news for fuel-intensive industries like trucking, but according to Geoff Dossetter, spokesman for Britain’s Freight Transport Assn., trucking companies in some countries will feel the positive effects more than others.

“The fact that crude oil prices have fallen has had only a marginal effect on us here in Britain because we are paying this massive, excessive fuel (tax on diesel),” he said.

British truckers pay about $3.56 cents a gallon for diesel, of which $2.97 cents goes to taxes. That means a drop of a penny or two on the actual fuel does not have much effect, he said.

The drop in crude oil prices could also be another sign that global economic growth is slowing.

“Demand is down in Britain due to a slowdown in the economy over the last three months, which is part of the whole world process,” Mr. Dossetter said. “All the indicators seem to be coming together, and growth in road transport could drop to 1% this year, which is getting close to recession.”

EDITOR’S NOTE: The U.S. average price of diesel fuel fell by 0.1 cent in the latest survey to close at $1.034 on Nov. 9, according to the Energy Information Administration. See the fuel price chart on page 6.