In my last column, I highlighted the roller coaster ride that oil prices and, by extension, those working across the industry have experienced over the past decade. I also mentioned the prospect of demand destruction, which some analysts are already baking into their year-end assessments.
As the conflict between the US and Iran continues to simmer, the industry is on track to finish the year with oil prices far higher than most observers anticipated.
Contributing to the tighter supply picture, albeit to a lesser extent, are Ukraine's drone attacks on Russia's oil processing and export infrastructure. More recently, Houthi strikes targeting Saudi Arabian energy assets and shipping routes in the Red Sea have added another driver of market uncertainty.
As of this writing, the global benchmark, Brent crude, is bouncing around $100/bbl to $105/bbl, while the US benchmark of West Texas Intermediate is holding above $90/bbl.
The prolonged period of high prices has led some to warn that the signs of demand destruction are emerging.
In September, the International Energy Agency (IEA) said it expects global supply to decline by 5.7 million B/D to 101.7 million B/D in 2026, representing a 6% decrease from 2025.
The IEA also said world oil demand will likely fall this year by 2.5 million B/D, which was almost 1 million B/D more than it predicted in August. According to the IEA, demand destruction is emerging most clearly in Asia, where consumption of middle distillates used for transportation and heating is declining.
The US Energy Information Administration (EIA) issued a less pessimistic outlook in June, forecasting that global oil demand would decline by 1.1 million B/D this year. While its October update focused primarily on supply conditions rather than demand, the agency noted that the volume of shut-in oil production in the Middle East fell from 5.8 million B/D in August to 4.8 million B/D in September.
DNV's outlook is even more bearish on demand than the IEA or the EIA. The Norwegian assurance and risk management firm estimates that global oil demand could already be down by more than 3 million B/D, roughly equivalent to Japan's daily oil consumption.
In its October 2026 Energy Transition Outlook, DNV went further, arguing that global oil markets could face permanent demand destruction of 2–5% by 2040. The extent of the decline, according to the firm, will depend on how long the US/Iran conflict continues.
A resolution that restores normal shipping through the Strait of Hormuz by next year would limit the impact, while a disruption lasting as long as 4 years could result in a bigger hit to demand.
DNV pointed to several emerging consumer trends to support its assessment. Among them is the rapid adoption of electric vehicles outside the industry's three dominant markets of China, Europe, and the US, where sales have nearly doubled year over year.
When the US and Iran will reach a lasting agreement is anyone's guess. What is becoming increasingly clear, however, is that a prolonged conflict and continued restrictions on crude oil and liquefied natural gas exports from the Persian Gulf will impose significant costs on energy consumers around the world.
Speaking at the 2026 Energy Intelligence Forum in London, Saudi Aramco CEO Amin Nasser described the situation as the "most serious energy supply shock in my career."
Nasser emphasized the mounting stress on global energy markets by noting that commercial inventories have fallen from almost 10 billion bbl before the war to less than 6 billion bbl. He also warned that higher crude prices will continue to filter straight through to refined fuels.
While emergency reserves can provide a temporary buffer, the leader of the world’s largest oil company made it clear that, without the restoration of free passage through the Strait of Hormuz, more upward pressure is in store for both crude and refined product prices.
However, Nasser also said something that might counter the predictions of a lasting demand destruction.
He said that, once shipping through the strait returns to normal, rebuilding emergency stockpiles while meeting global energy demand could take as long as 2 years. That could require about 2 million B/D of crude to replenish those stocks.
Supposing the strait reopens in the coming months, the IEA is among those expecting oil demand to rebound. In its September outlook, the agency projected that global oil demand would recover by 2.6 million B/D next year, slightly exceeding the demand losses it currently forecasts for 2026.
It is also worth remembering that forecasts of peak oil demand have missed the mark before. During the onset of the COVID-19 pandemic, many analysts argued that oil consumption might never return to its prepandemic level of nearly 100 million B/D. Instead, demand recovered more quickly than expected, reaching somewhere between 104 million and 105 million B/D before the outbreak of the current conflict.
But, as long as the current status quo holds, the world remains exposed to rising inflation and the economic pain that comes with it. The consequences of unaffordable energy also fall disproportionately on the world's poorest populations, who, in Nasser's words, "suffer first and suffer the most."
Nasser's full speech can be found here and is worth a read.
