The US raised its projections for the price of diesel and gasoline next year, indicating that consumer relief will be limited even as oil flows pick up from the Middle East.
The Energy Information Administration increased its projected retail price of gasoline in 2027 to an average of $3.73 a gallon, up from $3.56 a gallon seen in October, citing expectations for persistent tightness in global fuel supplies. It also hiked its expected price of diesel next year to $5.03 a gallon, up from $4.49 a gallon.
The forecast, included in the Short-Term Energy Outlook, was completed Nov. 5.
Energy prices have soared as a result of the US-Iran conflict, and were further exacerbated by continued Ukrainian drone strikes on Russian oil refineries. The high cost of gasoline and diesel played a central role in driving discontent with US President Donald Trump’s Republican Party, leading in part to a historic Democratic sweep of last week’s midterm elections.
To be sure, retail fuel prices are easing, and US gasoline prices dipped below $4 a gallon on Monday for the first time since July, according to AAA. Gas prices typically fall headed into the winter. But the projected prices are considerably above their 2025 levels, indicating that a return to normalcy in energy markets may yet be distant.
Oil traders are also watching closely for any signs of demand destruction, including short-term and structural changes. The EIA estimated that global liquid fuels consumption will be down 2 million barrels per day in 2026 — stemming from cutbacks in China and also decreased economic activity and air travel in the Middle East.
Iran-backed Houthi rebel attacks on Riyadh’s main airport shut down the transportation hub for two weeks in October, and airlines have cancelled flights as far out as December.
But that lost demand is expected to recover fully in 2027, according to the EIA.
Meanwhile, Brent crude oil prices are expected to average $104 a barrel in November and $99 a barrel in December. They’re seen at $86 a barrel in 2027. Brent is currently trading near $92 a barrel, down sharply in the week after the elections as traders boost bets on a resolution to the Iran conflict.
Still, there are some factors that may yet put a floor under prices. The EIA sees global oil inventories building in the final months of 2026 and continuing to rise through 2027.
The agency also hiked its expectations for natural gas in US storage at the end of November, owing to a warm start to the month.
Written by: Will Kubzansky @Bloomberg
The post “US Raises Forecasts for 2027 Gasoline and Diesel Prices” first appeared on Bloomberg