Global Oil Demand Falls, Yet US Gasoline Consumption Rises

Global oil demand is projected to decrease this year, marking the first such decline since 2020, according to a report from the International Energy Agency. The agency anticipates a drop of approximately 1 million barrels per day by 2026, attributed to higher oil prices and supply chain disruptions. These disruptions have unevenly affected various regions worldwide, notably the Persian Gulf, where conflict led to significant delays in oil shipments.

International Energy Agency data indicated that global oil demand averaged 97.9 million barrels per day in May, a decrease of 5.3 million barrels per day compared to the previous year. Asia, particularly China, accounted for a substantial portion of this decline, with China reducing its oil consumption by 1.5 million barrels per day. This reduction was partly a response to increased prices and the war between the U.S. and Iran, which impacted the stability of shipments through the Strait of Hormuz.

China's strategy involved significantly cutting its purchases of crude oil and temporarily halting the filling of its strategic petroleum reserve. The crisis also accelerated China's adoption of electric vehicles, leading to an estimated loss of 500,000 to 600,000 barrels per day in demand for gasoline and diesel.

In contrast, the United States has seen an increase in gasoline use during the second quarter of 2026, despite pump prices being roughly 50% higher than pre-conflict levels in May. Analysts suggest this trend may be influenced by a long-term decline in the percentage of household income spent on gasoline and a shift from remote work back to in-office employment.

While a fragile ceasefire in June allowed for some resumption of shipments through the Strait of Hormuz, leading to a temporary decrease in oil prices, tensions remain. Experts note that the ongoing "gray zone conflict" between the U.S. and Iran does not appear to be a significant shock to the oil market in the same way previous escalations were.

Further complicating the global supply picture, refineries in Russia were damaged by drone attacks, and Middle Eastern refineries sustained damage from recent conflicts. This has contributed to sustained high prices for refined products like gasoline and diesel, even as crude oil supply has increased and demand has softened globally.