America returns to gas-guzzling oil demand America's appetite for oil is growing so fast it is now hard for those charged with measuring it to keep track. In November the US government's Energy Information Administration began publishing weekly data that suggested US oil consumption was running 4-5 per cent higher than a year ago. For some products such as propane and propylene, which are used in petrochemical plants and agriculture, growth was in the double digits. US oil demand Factors behind the rise For a country where oil demand was thought to be in structural decline, as car engines have become more efficient and heavy industries move offshore, the numbers were startling - so startling they were widely dismissed. But as more reliable monthly data has followed, some observers believe something big is stirring in the oil market. "After years of emerging market demand leadership, [the US is] beginning to lead global oil demand again," says Jeffrey Currie, head of commodities research at Goldman Sachs. As recently as December the International Energy Agency, the world's leading oil forecaster, estimated demand in China had grown almost twice as much as in the US last year. It said US consumption would decline in 2014 for the seventh year in 10. But this week the IEA tore up its estimates. It is now saying US demand growth exceeded China's last year for the first time since 1999 and that US consumption will continue to grow this year. As well as indicating the remarkable speed at which patterns of demand are changing in the US, this tells us two crucial things about the oil market. First, America's shale drilling boom is acting as a spur to oil consumption as well as production in the world's biggest demand centre. Second, the global oil market, which for a decade has depended on China to absorb excess supply, now has other props. Farmers, factories and drivers have helped fuel America's return to growth in oil demand. While the boom in shale oil production has not lowered US petrol prices much, it has kept them steady between $3 to $4 per gallon over the past two years. That has triggered an uptick in US gasoline consumption, which alone accounts for almost 10 per cent of global oil use. It is also disrupting the long-term trend towards increased fuel efficiency in the US. Goldman analysts say miles travelled per gallon of gasoline actually fell in the second half of last year, as Americans responded to signs of economic recovery by buying gas-guzzling SUVs, which had been shunned during the recession. A bumper US corn harvest in wet weather led farmers to burn huge volumes of propane in furnaces to dry their crops, while petrochemical plants, which are enjoying cheap feedstocks as a result of increased shale oil and gas output, have stepped up purchases in recent months. "We may well look back on this period as a turning point not just for the US economy, but also for US industry," says Matthew Parry, at the IEA. For the global oil market this has meant the US consumer is doing a chunk of the work of absorbing record breaking growth in domestic production. While US exports of oil products continued to rise rapidly last year, growth slowed compared to 2012, as refiners also found healthy domestic markets. And, along with a tentative return to growth in other developed markets including Europe, US demand could also help to support global oil prices for over the rest of the year. Few analysts expect this year to be a repeat of 2013, when US demand grew by 390,000 b/d, or a third of the global total, according to the IEA. Despite the flurry of SUV purchases, engines continue to become more fuel efficient and demand from the petrochemical sector will also be capped by capacity constraints in the short-term. But the industrial benefits of cheap and plentiful domestic energy mean US oil demand could continue to grow steadily. Indeed, Mr Parry says the IEA could yet revise upward its US demand estimates for 2013 and 2014, if trends in the weekly data releases persist. The picture in China - the world's second largest market after the US - is less certain. The IEA says oil demand there grew by the least since 2005 last year, and with the country now a regular net exporter of gasoline and diesel, the government has less incentive to open new refineries rapidly. But Mr Parry says in China, too, the bias is towards upward revisions of demand, with concerns that data have not fully captured the draw down of oil from storage. With the IEA already forecasting this year to be the strongest for demand growth since 2010, and usage in China, Europe and the US growing in tandem, the outlook for oil demand is turning robust.