In EIA's January Short-Term Energy Outlook (STEO), the average U.S. retail gasoline prices are expected to decrease in 2024 because of increased inventories related to increased refinery capacity.
In 2025, it is expected that slightly reduced gasoline consumption to further decrease prices. The EIA expects similar supply-side factors to lower retail diesel prices in 2024 and 2025, although U.S. diesel consumption will likely exceed 2023 in both 2024 and 2025.
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO), January 2024
EIA expects crude oil prices in 2024 to be similar to those in 2023. As a result, their lower gasoline and diesel price outlooks next year reflect narrowing crack spreads, the difference between the wholesale prices of gasoline and diesel compared with crude oil. Crack spreads reflect the price of refining, and a lower crack spread indicates lower refining cost. Their lower forecast crack spread for gasoline is driven by their expectation of increasing availability of supply even as consumption is reduced.
In 2023, additional refinery capacity came online, raising U.S. operable refinery capacity from 18.06 million barrels per day (b/d) in January 2023 to 18.31 million b/d in December 2023. EIA expects the availability of the new refinery capacity will ease price pressure on petroleum products in 2024. In 2025, they expect lower crude oil prices, which will also reduce gasoline and diesel prices.
New international production from refineries in the Middle East, particularly Kuwait, have also increased the pool of gasoline and diesel on world markets. Increasing global refined products supply will contribute to easing international price pressure on both fuels. EIA expects gasoline consumption to remain relatively flat in 2024 and to decrease only slightly in 2025, by less than 1%. In both years, they expect slowing but consistent economic growth. Flat or decreasing gasoline consumption despite economic growth is relatively uncommon. Since 1990, gasoline consumption has declined amid positive economic growth in only two years (2010 and 2012).
Although they expect more diesel production and less strain on U.S. and global inventories to reduce diesel prices in 2024 and 2025, they also expect annual U.S. average diesel consumption to grow modestly, by 1.3%, or about 50,000 b/d, in 2024 supported by continuing economic growth.
Their forecast for gasoline and diesel prices is subject to significant uncertainty, including any factors that might affect crude oil prices and pass through to retail fuel prices. In addition, prices could be higher if more unplanned refinery shutdowns, further disruptions to international trade flows, or new logistical bottlenecks that hinder the movement of fuels between regions occur. By early 2025, EIA currently expects LyondellBasell’s Houston refinery in Texas will close and Phillips 66’s Rodeo refinery in California will complete its ongoing conversion to renewable diesel production, although the timing of both may vary based on market conditions and the schedules of the owners.
