Global oil demand set to fall while U.S. gasoline use rises

Global oil demand is expected to drop for the first time since 2020, with the International Energy Agency forecasting a reduction of about 1 million barrels per day by 2026. The decline is attributed to higher prices and supply disruptions, including a three-month blockage of crude shipments in the Persian Gulf after the U.S.–Iran conflict.

"The future of Hormuz is probably more uncertain today than it was at the beginning of the war," said Jim Burkhard, vice president and head of crude oil research at S&P Global Energy.

In May, global consumption averaged 97.9 million barrels per day, down 5.3 million barrels from the previous year, with the steepest fall in Asia. China cut its oil purchases by nearly 6 million barrels per day, halting additions to its strategic petroleum reserve and shifting to electric vehicles, which analysts estimate will reduce gasoline and diesel demand by 500,000-600,000 barrels per day.

A fragile cease-fire allowed some vessels to resume transit through the Strait of Hormuz in June, easing supply pressures and preventing a sharp price surge despite renewed U.S.–Iran tensions. Experts note that limited demand, especially from China and damaged refineries in Russia and the Middle East, kept crude prices from rising sharply, while refined-product prices remained elevated.

In the United States, gasoline prices averaged over $4.50 per gallon in May, more than 50% higher than pre-war levels, yet consumption rose in the second quarter. Analysts attribute this to a declining share of household income spent on fuel and a shift back to office-based work.

"Even though it’s a really political price that people pay a lot of attention to, if you are in the higher quintiles of income in the U.S., you might grumble about it, but you’re not really driving less just because of that increase in prices," said Daniel Sternoff, senior fellow at Columbia University's Center on Global Energy Policy.