J.P. Morgan: The economy is still growing, but oil demand keeps falling: How JPMorgan sees the prospects for a rebound

How widespread is the decline in oil consumption?

In August 2026, oil consumption in South Korea and Taiwan, China, fell by 13% and 16% year over year, respectively; Japan's oil consumption has fallen year over year for seven consecutive months. Meanwhile, every economy in the sample grew in both the first and second quarters.
Similar changes have occurred in Europe: from the start of the war through August, demand for gasoline and diesel in France fell 7% year over year, automotive fuel consumption in Germany fell 6%, and total oil demand in Italy fell 3%. Automotive fuel consumption in both France and Germany fell 8% year over year in August.
National statistical measures differ: some cover total oil consumption, while others count only automotive fuel sales. JPMorgan builds its own demand models by country and product, then cross-checks them against official data; the bank believes the official data confirm a broad and sustained contraction in demand across major consuming economies.

JPMorgan economists estimate that global economic growth was close to 3% in the second and third quarters of 2026, above the bank's estimate of potential growth of 2.3%. Growth in South Korea and Taiwan, China, benefited from investment in artificial intelligence and semiconductors, while US growth was also supported by consumption and technology capital spending, including on data centers.
These sources of growth require energy, but not necessarily more oil: semiconductor manufacturing, data centers and advanced manufacturing rely more heavily on electricity, while digital services can generate output with limited growth in oil use. Services also account for a growing share of household spending.
Electricity data are consistent with this explanation: since the start of the war, electricity demand has risen 2% in countries that publish relevant statistics, while oil consumption has fallen 5%. However, changes in the composition of growth still do not fully explain the speed and magnitude of the decline in oil demand.

High oil prices, supply disruptions and concerns about the availability of crude and refined products have prompted consumers to conserve fuel, reduce consumption or seek alternatives. JPMorgan is inclined to believe that some demand will rebound as prices and supplies return to normal, consistent with historical patterns of recovery after major economic shocks.
The size of the rebound depends on whether the adjustments persist. In the past, demand has often recovered to near its previous level, but its subsequent growth trajectory has been flatter; if this shock has accelerated electrification, efficiency gains and the transition to economic activities that use less oil, the recovery could be markedly weaker than the historical relationship between GDP and oil consumption would suggest.
The bank's supply and demand model forecasts that global oil demand will rise from 102.7 million barrels per day in 2026 to 107.3 million barrels per day in 2027; over the same period, supply rises from 101.3 million to 110.8 million barrels per day. According to the balance items in the model, the market will shift from an inventory draw of 1.4 million barrels per day in 2026 to an inventory build of 3.6 million barrels per day in 2027.