EIA lowers U.S. gasoline price forecasts for 2026 and 2027, citing expected drop in crude oil prices
AI-madeThe U.S. Energy Information Administration quietly trimmed its gasoline price outlook on July 7 — and the revision was anything but minor. In its July Short-Term Energy Outlook, the EIA cut its U.S. regular gasoline price forecast for 2026 from $3.90 to $3.64 per gallon and slashed its 2027 projection even further, from $3.64 down to $3.09 per gallon.
The primary driver, the agency says, is an expected decline in crude oil prices. But the full picture is more complicated.
EIA revises gasoline price forecasts downward for 2026 and 2027
The EIA dropped its July Short-Term Energy Outlook on July 7, with forecasts locked in as of July 1. The cuts were steep. For 2026, the annual average fell from $3.90 to $3.64 per gallon. For 2027, it dropped from $3.64 to $3.09 — a 55-cent reduction year-over-year.
Refiners worked to maximize jet fuel production and maintain distillate output in response to strong global demand, leaving less capacity for gasoline.
The quarterly breakdown gets more granular. The EIA projects $3.80 per gallon in Q3 2026, easing to $3.39 in Q4 2026, and then prices are expected to drop to an annual average close to $3.10 per gallon throughout 2027. For comparison, June’s STEO had projected $4.26 per gallon for Q3 2026 and $3.41 for Q4 2027. This July revision is a real downshift — not a rounding error.
Lower crude oil price forecasts drive the revision
Crude oil prices are the EIA’s stated explanation for the change. The agency cut its 2026 Brent spot price forecast from $95.40 to $81.91 per barrel, while WTI dropped from $88.32 to $76.26. Those are substantial reductions, and they flow directly into gasoline projections.
“We expect lower crude oil prices will contribute to retail gasoline prices falling by about 41 cents per gallon in the third quarter compared with 2Q26,” the EIA stated in its July STEO.
The agency also noted that the crude oil price decline contributes to a drop of nearly 50 cents per gallon on a quarter-on-quarter basis. A substantial swing — but it doesn’t tell the whole story.
Tight inventories and retail margins partially offset crude oil price declines
Here’s where it gets complicated. Crude oil price declines won’t fully translate into lower prices at the pump—at least not right away.
Tight gasoline inventories are expected to support the crack spread—the difference between the wholesale price of gasoline and the price of crude oil. Because wholesale prices aren’t expected to fall as fast as crude, the spread widens. The EIA estimates the crack spread will increase by about 10 cents per gallon on average in Q3 2026, with retail margins telling a similar story—the agency expects a comparable increase in average regional retail and distribution margins, which shift by region depending on local inventory levels and import access.
“Retail prices historically decrease more slowly than crude oil prices due to the more decentralized nature of retail markets,” the EIA noted, also flagging ongoing uncertainty in global petroleum markets. The upside: competitive pressure should narrow crack spreads significantly in Q4 2026 as inventories rebuild and summer demand fades, pulling prices toward $3.40 per gallon.
Gasoline inventory conditions and consumption outlook
Inventory tightness didn’t come out of nowhere. In April and May 2026, gasoline inventories dropped below the five-year range — defined as 2021 through 2025 — due to lower production, fewer imports, and higher exports. Refiners worked to maximize jet fuel production and maintain distillate output in response to strong global demand, leaving less capacity for gasoline. On the trade side, U.S. exports from the Gulf Coast rose sharply while East Coast imports from the Atlantic Basin declined after becoming more expensive.
The EIA expects increased production and higher net imports to help stabilize gasoline supplies by Q4 2026, with inventories reaching five-year averages early in 2027. Refiners are projected to boost gasoline yields in the second half of 2026 to support that recovery.
Demand, meanwhile, looks subdued. U.S. gasoline consumption in H2 2026 is forecast to stay below the five-year average — dipping below the five-year low during some months — due to elevated prices and broader economic conditions. Lower consumption combined with higher production and imports should support inventory growth through year-end.
Current and recent gasoline prices at the pump
While the forecasts point lower, current prices remain elevated compared to a year ago. EIA data shows the national average for regular gasoline declining from $3.914 per gallon on June 22 to $3.777 per gallon on July 6 — a notable dip over just two weeks.
As of July 10, AAA reported the national average at $3.884 per gallon, up from $3.172 per gallon a year earlier. That’s a year-over-year jump of more than 70 cents. Regional gaps remain wide: the West Coast averaged $4.831 per gallon as of July 6, while the Gulf Coast came in at $3.343—a difference of nearly $1.50. For reference, the all-time recorded average high for U.S. regular gasoline was $5.016 per gallon on June 14, 2022, according to AAA.
The bottom line: the EIA now expects gasoline prices to trend meaningfully lower through 2026 and into 2027, driven mainly by falling crude oil costs. Tight inventories, wider crack spreads, and slow-moving retail margins will cushion that decline in the near term. The clearest relief, according to the agency’s projections, is likely to show up in late 2026 and throughout 2027.
Kelly is an experienced writer with 15 years of experience exploring the big stories that shape our world, from tech breakthroughs and space exploration to climate, energy, and the fascinating quirks of science. She has a talent for turning complex ideas into sharp, memorable insights that stay with readers long after they’ve finished reading.
