Jeremey Peters' New York Times article on the trade deficit says that there is no sign that the US demand for oil imports is slowing.   The evidence: oil imports, in millions of barrels per day, are as high as they have been since October. 

I disagree.   The evidence that higher prices are restraining demand for imported oil – both by encouraging marginal supply in the US to come on line and reducing US demand – is pretty good.   I like looking at the import volume series reported in exhibit 17 of the trade report.   Those volumes grew by 7.3% in 2003 (v 2002), 5.7% in 2004, 1.7% in 2005 and are down 2% so far this year (v. the first five months of 2005).   

Up until the recent surge in oil prices, oil imports were growing faster than overall US demand for oil.  Not anymore.  

I am not sure if this is more a demand response (less US demand for oil) or more a supply response (more domestic US production), but it seems like pretty clear evidence to me.  My forecasts for the 2006 trade deficit now incorporate a baseline without any increase in demand for imported oil.  I probably should work in a small fall. 

Incidentally, Chinese demand for oil is up 15% y/y.    Probably because new car sales have been growing like mad.    It probably isn’t an accident that in the face of growing Chinese demand and limited growth in supply, higher prices have helped to push US demand down.    That’s how markets work.  They match demand and supply.

I also wanted to build on a couple of points that I made yesterday -- points that put me outside the emerging consensus (see the various investment bank daily comments) that the non-oil trade deficit may have peaked.  My worry: folks are extrapolating on the basis of recent trends on the non-oil import and export side that may not be sustained.