US Oil Production Is Booming. So Is Demand.

I’m slightly embarrassed to admit that on my US road trip last week, the tank-sized sports utility vehicle provided by the rental company delivered a ludicrously low average fuel economy of 26.4 miles per gallon. That may sound about right to US readers, but in the UK I typically achieve 45-plus miles. Of course, my US friends roll their eyes at the tiny Honda I drive in London; my US ride was a Ford Explorer better suited to a war zone than the leafy byways of Maine.

My shock at the gas station was a timely reminder of an underappreciated companion to the “drill, baby, drill” mantra that’s transformed US oil production — demand is also booming.

Oil is a hard-to-break addiction, even more so when one is swimming in petroleum. And, in fact, the US produces more oil than it consumes. The shale revolution provides a political embarrassment of riches — one that, via low prices and taxes, subsidizes rising consumption.

On current trends, the US will consume an annual average of 20.59 million barrels a day in 2025, the highest in 18 years. It helps that the US Energy Information Administration, the government body that counts the barrels, recently revised significantly higher its estimate of 2024 oil demand1. Further increases are likely, putting in play the current 20-year-old record — a high-water mark that the industry had thought would remain unchallenged.

It would be easy to blame the pro-fossil fuel Trump administration for the increase, but much of what’s happening today took shape during the Biden years, and even earlier during the first Trump administration and the Obama years. It was then that a wave of petrochemical plants was announced, paving the way for today’s rising demand for black gold.

What President Donald Trump is doing, however, is fashioning future trends. In the short-term, tariffs may hurt economic development, and thus slow oil consumption growth. But putting aside that one-off impact, his policies will only boost demand. His dislike of electric vehicles would be important, but even more so his support for large, gas-guzzling US-made cars – the kind I drove last week.

Until Trump won his second term, the American energy industry had largely accepted that the country’s oil consumption all-time high, set in 2005 at 20.8 million barrels a day before the onset of the global financial crisis, was unassailable. Rising efficiency meant that, after a brief recovery following the pandemic, America was a post-peak oil demand nation, like other rich countries such as Germany, France and Japan. Thus, only a few months ago, the International Energy Agency said that US consumption would fall every year from 2025 onwards, reaching 20.01 million barrels a day by 2030.

Today, the downward path looks uncertain. Can US oil demand grow further, setting a new high? Many — me included — think there’s a good chance. The most updated forecast from the IEA, looking only up to 2026, already shows a small increase next year.

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High US per capita oil consumption — more than double that of Germany, Japan and the UK — is driven by several factors: A rich population living in sprawling suburbia; poor public transport; and a strong domestic oil industry that’s prompted the country to kept fuel taxes low, delivering cheaper gasoline and diesel than other rich nations. As a result, the US swallows two in every 10 barrels the world consumes today.

The internal composition of that demand is changing. Back in 2005, when American overall oil demand set its record, gasoline and diesel were at the forefront of the country’s usage growth. Today, consumption of both fuels is down from the most recent peaks. Instead, the fastest-growing fraction of the barrel is ethane, used overwhelmingly as a feedstock in the petrochemical industry, where it becomes the building block of plastics2. US jet-fuel demand is also growing rapidly.

Can ethane and jet-fuel alone keep American oil consumption growing? Not if gasoline and diesel act as a headwind. If vehicle fuel efficiency and electrification continue at pace, total US petroleum demand would struggle to increase.

Despite its importance, the impact of improving car fuel economy is typically underappreciated; talking about electric vehicles is sexier than listing improvements in engine technology for gasoline cars. Still, the data shows how much progress has been made. The average 2024 US car model runs 40% farther on the same amount of gasoline than one built in 2005, reaching about 24.9 miles per gallon, according to government data. That’s a sharp reversal from the 12% decline in fuel economy from 1988 to 2004, when Americans bought heavier, less efficient SUVs.

The Trump administration seems determined to revert to the dark days of declining fuel economy. From 1975 until this year, US car companies faced penalties if they didn’t meet annual improvement targets; but the White House has now promised not to sanction violations, giving the car industry carte blanche to do as it sees fit. Current low oil prices would only convince more Americans to buy large SUVs; I ended paying less to fill up at the gas station last week than I would have done in England even using my far more efficient car.

Combined with the White House’s disdain for electric vehicles, US gasoline consumption is likely to be stronger than would have otherwise been the case. Add rising use of jet-fuel and petrochemicals, and all the ingredients are there for a new record in American petroleum consumption. At times forgotten due to the rise of China, the US remains the world’s largest oil consumer. What happens there will thus reverberate beyond. And today in Washington, there’s a greater emphasis on preserving the energy status quo rather than changing it. Oil — and large cars — are back in fashion; climate change is out of favor.