With the average gasoline price in the United States surpassing $4.50 per gallon — a rise of about 40 percent since the onset of the Iran war in late February — Americans are opting to drive less, choosing trains and buses instead. This is considered the largest oil supply disruption in history, leading U.S. drivers to spend $45 billion more on gasoline and diesel than last year. A survey conducted in late April by ABC News, The Washington Post, and Ipsos found that 44 percent of U.S. adults have reduced their driving due to high gas prices.
Cities nationwide, from Cincinnati to Los Angeles, are witnessing an uptick in public transit usage. The past few months have also seen a substantial increase in sales of used electric and hybrid vehicles. Additionally, people are turning to bikes and scooters for transportation, and rail services like Amtrak have seen increased ridership. Despite the challenges posed by America’s highway-centric infrastructure, many are reducing their driving by carpooling, consolidating errands, or working remotely more frequently.
Some experts suggest this could signal the beginning of a global shift towards renewable energy, even if most Americans eventually return to their cars. In Asia, where the impact is most severe, there is a re-evaluation of fossil fuel dependency. Previously, Asia was expected to account for nearly all the growth in oil and gas consumption in the coming decades.
“If Asia decides against growing with fossil fuels and opts for electrotech instead, fossil fuel demand could peak sooner than anticipated,” said Daan Walter, who oversees strategy research at the think tank Ember. “If the crisis remains severe and this transition occurs, we may be witnessing the peak year of oil, with demand never returning to pre-Hormuz levels.”
With approximately 20 percent of the world’s oil shipments hindered in the Strait of Hormuz, households and industries are discovering ways to use less oil. This leads to what economists call “demand destruction,” where the world requires less oil than before. According to the International Energy Agency, this phenomenon is already unfolding globally. Last week, the agency reiterated that oil demand is being destroyed, predicting a reduction of 420,000 barrels a day this year. This is viewed as a silver lining amidst a grim situation: Middle Eastern conflicts are prompting a shift away from fossil fuels.
The term “demand destruction” is often used to describe a dramatic, short-term drop in demand, but it is more accurately a sign of a deeper economic shift. “To me, ‘demand destruction’ only makes sense as a long-term concept where the demand source is truly destroyed,” said Kenneth Gillingham, a professor of environmental and energy economics at Yale University.
While the global reduction in oil demand is more pronounced in Asia, the United States, with its relative wealth, continues to afford higher fuel costs, despite the strain on low- and middle-income Americans’ budgets. In Japan, factories are producing fewer petrochemical products, with naphtha demand dropping 25 percent year-over-year, highlighting the country’s long-term decline in oil demand. The report also notes a 5 percent decrease in gasoline demand in South Korea as pump prices rose, indicating that behavioral changes are contributing to demand destruction. Amid the deepening Middle East crisis, South Korean President Lee Jae Myung advocated for a rapid shift to renewable energy, warning, “Our future is at serious risk if we continue relying on fossil fuels.”
Countries like Pakistan, the Philippines, and Sri Lanka are also reducing oil consumption by implementing four-day work weeks to lessen commuting.
The permanence of these fuel-saving measures remains uncertain. President Donald Trump has assured that oil prices will “drop like a rock” once the Iran conflict ends. However, even with the resumption of shipping through the Strait of Hormuz, oil supplies may stay limited for months as facilities undergo repairs and wells restart. With this being the second oil shock in recent years, following Russia’s 2022 invasion of Ukraine, experts suggest that the pattern of oil crises may lead to a long-term decline in demand.
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“When prices stay low for a long time, a shock might seem insignificant. But repeated shocks can prompt people to consider real changes,” Gillingham noted.
A report from Ember, co-authored by Walter, argues that the “twin fossil shock” of the 2020s creates new political opportunities, similar to the double oil shocks in the 1970s that spurred investments in energy efficiency and nuclear power. “The parallels with the 1970s oil shocks are striking, but so is the difference,” the authors write. “For the first time, scalable, cost-effective alternatives like solar, wind, batteries, EVs, and other electrotech offer a permanent escape from fossil dependence.”
The report forecasts that Asia, the most affected by the current oil crisis, will accelerate its shift to electrification, transitioning to EVs and moving away from liquefied natural gas in power generation. The first indication of this shift: China’s exports of solar panels, batteries, and electric vehicles surged in March after the bombing in Iran commenced.
“This crisis jolts countries and companies out of their complacency, forcing them to reconsider reliance on a stable fossil fuel system,” Walter said. “Import dependency is highly risky right now, and the second crisis confirms this.”
Some new practices adopted during the oil crisis may persist. “A significant increase in gas prices or a freeway closure due to an earthquake can effectively encourage people to change their behavior,” said Susan Handy, a professor of environmental science and policy at the University of California, Davis. “It’s difficult to drive behavior change without these shocks — although we don’t want them, they do push for change.” When a collapsed bridge reopens, most people may return to driving, but some might maintain their new biking habits, she explained.
What influences whether a new habit becomes permanent? According to Handy, it depends on what people find enjoyable. People might discover they prefer biking around town or reading on the bus instead of sitting in traffic. “There are likely more alternatives available than people realize, or the alternatives might be better than perceived,” Handy added. Rising prices can also lead to the adoption of more energy-efficient vehicles or appliances, which can result in long-term reduced fuel usage.
Nevertheless, Americans still drive extensively and are likely to continue doing so. “History shows that oil prices fluctuate frequently, even in recent times,” Gillingham stated. “Typically, short-term behavior changes tend to revert to previous patterns.”
Globally, however, the second oil crisis in five years, occurring as alternatives to fossil fuels become more affordable and widespread, may lead to enduring changes, hastening the decline of oil and the rise of cleaner alternatives. As the author Rebecca Solnit wrote in a recent newsletter: “What if in a decade or a century, people look back on this as the moment the world decisively turned away from this filthy, corrupting, unreliable, destructive resource?”
