Place a large saucepan over medium heat. Add the oil and heat for 30 seconds. Add the garlic, chili powder, paprika, and mustard. Stir until fragrant, about 30 seconds.
Add the diced peaches and toss to combine with spices.
Add the bourbon and bring the mixture to a simmer, stirring frequently.
Add the ketchup, vinegar, worcestershire sauce, sugar, salt, and pepper. Stir to combine. Bring the mixture to a low boil over medium heat. Reduce to a simmer and cook, stirring frequently, until the peaches are jammy and tender, about 15 minutes. The mixture should reduce by about ⅓ and coat the back of your spoon when stirred.
Remove the sauce from heat and cool slightly. Use an immersion blender or regular blender to carefully puree the sauce until smooth. Add the water as needed to reach desired consistency - I like my finished sauce to be slightly thinner than store-bought bbq sauce and more the consistency of a creamy salad dressing.
Store the cooled sauce in the refrigerator for up to 1 month or freeze for later use.
Calories per serving is based on a 2 tablespoon serving size of this recipe as written.