Global oil demand is set to decline this year for the first time since the COVID-19 pandemic in 2020, according to a report released by the International Energy Agency. The projected drop of about one million barrels per day in 2026 marks a significant shift in global energy markets, but one major exception stands out: gasoline consumption in the United States has actually increased despite sharply higher prices at the pump.
The decline in worldwide oil consumption reflects the severe disruptions caused by the ongoing conflict between the United States and Iran. The war has severely throttled supplies flowing through the Strait of Hormuz, one of the world’s most critical shipping routes for oil and gas. Ships carrying crude oil have been stranded in the Persian Gulf for extended periods, unable to safely transit through the waterway. Beyond the supply disruptions, higher oil prices have weighed heavily on demand across much of the globe, though the impact has been uneven across different regions and economic sectors.
Global oil demand averaged just 97.9 million barrels per day in May, down 5.3 million barrels per day from a year earlier. Much of the decline has been concentrated in Asia, which depends heavily on oil imports from the Middle East. China has experienced by far the largest drop globally, with consumption falling by 1.5 million barrels per day, representing a 9 percent decline. The Asian nation moved aggressively to cut oil purchases as prices spiked during the spring, reducing its overall consumption by nearly 6 million barrels per day at the height of the crisis.
China’s response demonstrated a strategic approach to the oil crisis. The country halted the routine filling of its strategic petroleum reserve, which it had been adding to at nearly one million barrels per day. Additionally, the rapid growth of electric vehicles in China helped reduce demand for traditional petroleum-based transportation fuels, with the country on track to see somewhere between 500,000 and 600,000 barrels per day of demand losses for gasoline and diesel since the conflict began.
The United States, however, has bucked this global trend. Despite gasoline prices surpassing an average of $4.50 per gallon in May—more than 50 percent above their levels before the war began—American drivers increased their gasoline consumption during the second quarter of 2026. The resilience of U.S. gasoline demand even in the face of elevated prices offers a stark contrast to demand destruction occurring elsewhere in the world.
Several factors explain why higher fuel costs haven’t dampened American driving. The percentage of household income spent on gasoline in the U.S. has been declining for years, meaning that even at elevated prices, fuel costs represent a smaller burden for many Americans than in the past. Additionally, many people have been transitioning from remote work arrangements back to in-office jobs, increasing the need for commuting and driving. For higher-income households, the political attention paid to gas prices often exceeds the actual impact on their behavior, with many continuing to drive at normal levels despite complaints about pump prices.
A fragile ceasefire agreement between the U.S. and Iran, announced in mid-June, temporarily enabled some oil shipments to resume through the Strait of Hormuz. This allowed more crude oil to reach global markets, helping to ease some of the supply pressure. Oil prices subsequently declined, with Brent crude falling from peaks above $140 per barrel in April to around $82 per barrel by mid-June. However, tensions escalated again earlier this month, with renewed military strikes between the two nations, though oil prices did not spike as severely as when the conflict initially erupted.
The lack of a major price reaction to recent escalations reflects the current oversupply situation. With less global demand for crude oil and growing supplies reaching markets, there are simply fewer buyers competing for the additional barrels becoming available. The situation remains precarious, however, as any further disruption to shipping through the Strait of Hormuz could quickly reverse the recent stability.
The divergence between global oil demand and U.S. gasoline consumption illustrates broader patterns in energy markets. While much of the world is taking steps to reduce fuel consumption and shift toward alternatives like electric vehicles, the United States continues to rely heavily on gasoline. The contraction in global demand is expected to be temporary, with analysts anticipating a rebound once supply flows fully normalize and oil prices decline further. For now, the combination of global demand destruction and resilient American driving behavior remains one of the more unusual dynamics in the current oil market.