The International Energy Agency predicts a decline in global oil demand for the first time since the COVID-19 pandemic in 2020. The drop is attributed to higher oil prices and disruptions to physical supply. China has significantly reduced its oil consumption, while the U.S. has seen an increase in gasoline use.
Global oil demand is set to decline this year for the first time since the height of the COVID-19 pandemic in 2020, according to a report from the International Energy Agency.
The drop, which the agency expects to amount to about 1 million barrels per day in 2026, is due to higher oil prices and disruptions to physical supply that weighed heavily, but unevenly, on various parts of the world. The report said that ships loaded with crude oil were stranded in the Persian Gulf for more than three months, unable to safely travel through the Strait of Hormuz.
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. Burkhard said Iran is still trying to control the strait, while the U.S. has not been able to fully restore normal operations, making a return to prewar conditions unlikely.
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 was in Asia, which relies heavily on oil from the Middle East. China's decrease of 1.5 million barrels per day, representing a 9% decline, was by far the largest globally, the report said.
But the main exception to the global slump in oil usage was in the U.S., where gasoline use increased in the second quarter of 2026, despite the fact that pump prices were about 50% above their prewar levels in May, the report said. China decided to massively cut down on purchasing oil from the global market as the price rose during the spring, reducing its consumption by almost 6 million barrels per day, Burkhard said.
One way China cut back its consumption was to temporarily stop filling up its strategic petroleum reserve, which it had been adding to at a rate of nearly 1 million barrels per day, said Daniel Sternoff, senior fellow at the Center on Global Energy Policy at Columbia University. The crisis also accelerated China's saving of road transportation fuels as its use of electric vehicles grew, he said.
A fragile ceasefire enabled some ships to exit through the Strait of Hormuz in June, which allowed more oil on the market. That led to lower oil prices.
This gray zone conflict that the U.S. and Iran are in, it's not really a shock to the oil market, it can push prices up and down a few dollars like it did the other day, but it's not the same shock that it was in early March when Iran did what many thought was unthinkable. Another reason oil prices didn't spike very high after recent military strikes is that there were fewer buyers available to scoop up the supply that had become available, experts said.
On top of China dramatically reducing consumption, several refineries in Russia were unable to process crude after being damaged in, and refineries in the Middle East remained damaged from the war, Burkhard said. As a result, prices for gasoline, diesel and other refined products have stayed inflated longer than oil prices, he said.
Gasoline prices surpassed $4.50 on average for a gallon of regular in the U.S. in May, rising more than 50% since the start of the war, according to AAA data. But that didn't stop drivers from hitting the road; in fact, gasoline consumption rose in the U.S. during the second quarter of the year. One reason may be because the percentage of household income spent on gasoline in the U.S. has been declining for years, Sternoff said.
Plus, many people have been transitioning from remote work to in-office jobs, he added. 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, Sternoff said
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