The Energy Information Administration said a U.S. and global economy in worse shape than expected a month ago has triggered steep downward revisions in the federal agency’s demand and price outlooks for crude oil and fuel for this year and 2009. The EIA said the revisions made in its Short-term Energy Outlook for November compared with its October projections were the most dramatic in its history, with its 2009 price outlook for retail gasoline and diesel slashed by more than $1 during the one-month period, while heating oil is now expected to cost less this winter than a year-ago.

A global contraction in crude oil demand has worked to significantly pressure crude oil prices that have also sparked a sharp reduction in expected prices for gasoline, diesel fuel, heating oil and propane.

“Consumption of all petroleum products is projected to decline substantially in 2008, driven down by the increase in prices and by a weakening economy during the second half of the year,” the agency said.

Pointing to another steep downward revision in worldwide Gross Domestic Product by the International Monetary Fund and on waning demand for developed nations, the International Energy Agency slashed its expectations for global oil demand for the current year and 2009, now projecting marginal growth in consumption. In its monthly outlook for November released on Nov. 13, the Paris-based international energy watchdog for 28 consuming nations cut its demand forecast for the current year by 330,000 bpd and by 670,000 bpd for 2009.

The latest revision follows a 240,000 bpd reduction in expected global oil demand for 2008 made by the IEA in October which came on the heels of a 100,000 bpd downside revision made in September, with global oil demand growth for the current year pegged at 120,000 bpd and total demand at 86.2 million bpd. For global oil demand in 2009, the sharp revision revealed in last week’s report follows a 440,000 bpd cut made by the IEA in October and a 140,000 bpd reduction made by the agency in September. The IEA now expects modest demand growth for 2009 350,000 bpd over 2008 levels, bringing projected world consumption for oil next year at 86.5 million bpd.