By Avi Salzman
Oil analysts have been scratching their heads for months about why prices haven't risen more. Brent crude has been hovering around $91 a barrel, despite the world experiencing its worst supply disruption ever because of the Iran war.
One explanation has been gaining traction, though, and it's bad news for producers: The world may be figuring out how to get by with less oil.
J.P. Morgan analyst Natasha Kaneva saw evidence of a change in behavior last month when she traveled to China, which appeared to be using about 9% less oil than before the war, "with remarkably little visible disruption," she wrote.
"The decline does not appear to be the product of a formal government conservation campaign," she added. "There were no conspicuous appeals to save energy, no major limits on mobility, and no sense of crisis in daily life. Instead, it looks like consumers have made a quiet economic choice."
Chinese consumers appeared to be flying less domestically, as airline ticket prices rise to account for surging fuel costs. But they haven't forgone all travel. Kaneva notes inter-regional bus trips hit a record over the May Day holiday. That suggests people were turning to public transportation, rather than paying up for fuel themselves.
There is evidence public transportation is getting more popular in the U.S., too, with Bloomberg reporting weekday public transit use is up nearly 8% this year in Los Angeles, with increases also recorded in Chicago and Boston.
For decades, oil demand has risen and fallen with the broader global economy. If the economy was rising, oil demand would, too. When the global economy contracted, like in 2009 and 2020, so did oil demand.
This year, that pattern could change. The world is still on track to grow overall gross domestic product, but oil demand is expected to fall, according to the International Energy Agency.
Jigar Shah, a top official in the Energy Department under President Joe Biden, argued energy-importing countries needed a nudge to fully commit to the energy transition -- and the Iran war has been that nudge. Indonesia, for instance, planned to replace diesel and coal electricity-generation units with cleaner alternatives, but had been moving slowly. Now the country is expediting the effort.
"They've been planning to change them to solar plus battery storage for 12 years and haven't done it," Shah said on a recent podcast. "Guess what? They're doing it now. Why? Because they can't even get the diesel to give to those islands."
It is nearly impossible to quantify how much oil demand has been destroyed during the war. Some countries don't provide easily trackable data. Kaneva thinks demand may have fallen by 5.6 million barrels per day, or about 5% of normal, in May. Others think it is more like four million barrels.
The question is whether that demand bounces back once the war ends. Not surprisingly, oil producers say they expect it to come roaring back.
"It is not actually destruction to demand, it is a pause in demand," said Sultan Ahmed Al Jaber, head of the Abu Dhabi National Oil Company, at the Atlantic Council Global Energy Forum in Washington D.C. on Tuesday.
In the Covid pandemic, "as soon as everything opened up, demand went back immediately to pre-COVID levels, immediately within a few months to pre-COVID levels, and then continued to rise. So it was almost a pause. Now this is what we're seeing right now as well," he added.
U.S. Energy Secretary Chris Wright, speaking at the same event, said the drop in oil use isn't permanent.
"There's no such thing as 4 million barrels a day of permanent demand destruction for oil," he said. "No oil, no modern world."
--Laura Sanicola contributed to this article.
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 09, 2026 19:18 ET (23:18 GMT)
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