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In the face of sharply rising oil cost over the last ten years, consumers cut back significantly on oil use through aggressive and widespread conservation measures and by switching to alternate fuels. Of the seven million barrels daily decline in Free World petroleum consumption from 1979 to 1982, at least 60 percent or 4.5 million barrels daily was due to conservation or higher oil prices.Analysis of specific industries shows dramatic reductions of oil use in the past several years. In the Japanese steel industry, fuel oil has been eliminated entirely in blast furnace operations, and overall oil demand has fallen from 232.000 BPD in 1973 to 35,000 BPD in 1982. Similar sharp reductions have occurred in U.S. steel-making, the pulp and paper industry, and transportation.Substantial conservation still lies ahead. The industrial countries are continuing to be impacted by the ripple effects of the 1973-74 price increases, while the brunt of the later 1979-80 price hikes is yet to be felt, particularly in the industrial and utility sectors. Conservation will, therefore, continue to be a drag on any increase in petroleum demand generated by economic recovery. The net effect may be a moderate lift to the demand for certain petroleum products in the short-term, but relatively slow growth in the longer term. Future demand for energy will also be adversely affected by prospects of much slower economic growth in the future than in the years before 1973.Texacos revised forecast ofFree World Energy Outlook to the Year 2OOO shows energy demand growing by two percent a year until the end of the century and petroleum demand by only one percent annually. This forecast is predicated on.an oil price scenario of declining real prices in the near-term and a rise toward the end of the decade in line with inflation and exceeding it in the 1990s. The net effect, however, is that real prices at the end of the period are no higher than at the beginning.This price scenario is consistent with a rough balance between demand and the supply of oil estimated to be available over the forecast period. But in the near-term, OPEC production will still be substantially below preferred levels-a situation that may be troublesome-although in the 1990s a tighter balance between potential supply and demand should develop.