EIA expects average U.S. gasoline and diesel prices to decrease in 2024 and 2025

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In our January Short-Term Energy Outlook (STEO), we expect average U.S. retail gasoline prices to decrease in 2024 because of increased inventories related to increased refinery capacity. In 2025, we expect slightly reduced gasoline consumption to further decrease prices. We expect 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.

Source: EIA

We expect crude oil prices in 2024 to be similar to those in 2023. As a result, our 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. Our lower forecast crack spread for gasoline is driven by our 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. We expect the availability of the new refinery capacity will ease price pressure on petroleum products in 2024. In 2025, we 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. We expect gasoline consumption to remain relatively flat in 2024 and to decrease only slightly in 2025, by less than 1%. In both years, we 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 we expect more diesel production and less strain on U.S. and global inventories to reduce diesel prices in 2024 and 2025, we 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.

Our 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, we currently expect 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.

Principal contributor: Kevin Hack

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About Stu Turley 3038 Articles
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor.   He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino. Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.