EIA Raises 2027 Gasoline Forecast to $3.73 a Gallon Despite Falling Prices
Key Facts
The U.S. Energy Information Administration raised its forecast for the average U.S. retail gasoline price in 2027 to $3.73 a gallon, up 4.7% from its previous estimate of $3.56, in its monthly Short-Term Energy Outlook released on November 10. The agency said gasoline and diesel prices will fall in 2027 compared with 2026 levels, despite raising its estimates for both fuels from last month's forecast. The revision reflects continued pressure in oil product markets, not a forecast for year-over-year price increases in 2027. The outlook is based on the assumption that global supply constraints for oil products will persist through the end of that year. EIA expects these conditions to contribute to wider refining margins for products next year.
The agency said: "We now assume that global oil product markets will face persistent supply constraints through the end of 2027." It added that market conditions will support wider refining margins and encourage U.S. refineries to keep operations at high levels. This indicates that gasoline and diesel prices do not necessarily move solely with crude prices, as they are also affected by the cost of processing crude and the availability of refined products. The agency partly attributed the limited supply available in the global market to damage to refineries in the Middle East and Russia, which reduced refined product exports. These constraints provide the backdrop for a higher retail price forecast, even as crude prices are expected to fall later.
November's forecasts followed a third consecutive monthly increase in crude prices in October, according to EIA. The agency attributed the increase to declining global inventories, attacks on tankers in the Arabian Gulf, shipping capacity constraints and higher transportation costs. It said these factors tightened supply, while U.S. commercial crude inventories stood at 410 million barrels at the end of October, the lowest end-of-month level since 2014. EIA expects U.S. inventories to remain below the five-year average until mid-2027, before rising gradually as net imports increase and the spread between Brent and West Texas crude narrows. A later recovery in inventories may ease the crude market, while refined product markets remain constrained under the agency's assumption.
In the crude market, the agency expects Brent to remain near $100 a barrel for the rest of 2026, before its average falls to $77 in the fourth quarter of 2027 as global inventories recover. It also expects U.S. crude oil production to reach a record 14.3 million barrels a day in 2027, up 3% from the record 13.9 million barrels a day in 2026. Production growth adds a source of supply to the crude outlook, but does not eliminate the effect of the refined product shortfall cited by EIA. This picture provides context for the divergence between the projected path for crude and the refining margins the agency expects to widen. September estimates put average retail diesel at $5.55 a gallon in the fourth quarter of 2026 and $4.40 in 2027.
In trading on November 9, the front-month U.S. diesel futures contract settled at $4.2148 a gallon, while the front-month U.S. gasoline futures contract settled at $2.6509. These are futures contract prices, not retail prices at the pump, and do not in themselves represent EIA's annual forecast. The agency said its forecast inputs were complete on November 5 and that it does not specifically take into account market events that occurred after that date. Its next Short-Term Energy Outlook update is scheduled for December 8, 2026. The November estimate remains tied to the market conditions and assumptions in place when the model was prepared.