U.S. Gasoline and Diesel Prices Projected to Fall in 2023 and 2024: EIA

The U.S. Energy Information Administration (EIA) projects retail gasoline and diesel prices to decrease in 2023 and 2024, following record highs during the first six months of 2022. The expected price decline can be attributed to projections of lower demand expansion for diesel and motor gasoline, due to high production costs and high inflation.

The EIA projects the average retail price for regular grade gasoline to be $3.32 per gallon in 2023 and continue to decline to an average of $3.09 per gallon in 2024. Meanwhile, the EIA expects highway diesel prices to decline in 2023 and average $4.23 per gallon. Moreover, the agency expects highway diesel prices to fall further in 2024 and average $3.70 per gallon in 2024.

Demand growth for gasoline is projected to be limited in 2023, while higher gasoline production will cause an increase in gasoline inventories in the U.S. The agency estimates that the annual average U.S. gasoline consumption increased by 0.3 million barrels per day in 2022 and is forecast to decline by 0.3 mb/d in 2023, in comparison to 2022. U.S. gasoline consumption is expected to remain flat year-on-year during 2024. Amid comfortable demand fundamentals, additional refinery capacity expansions are anticipated to become available in 2023. Both demand and supply factors are projected to contribute to lower gasoline prices in 2023 and 2024.

U.S. consumption of distillate fuel oil rose by 0.1 mb/d in 2022 to 4.2 mb/d. In the U.S., distillate fuel is mainly used as diesel road fuel, in agriculture, space heating and industrial uses. For both gasoline and distillate U.S. usage in 2022 was primarily in the first half of the year, before high prices led to reduced driving usage over the last six months of 2022.

The EIA expects U.S. demand for distillate to remain below 2022 for 2023 and 2024. In contrast, global demand for distillate fuel remains uncertain, particularly in Europe where sanctions on Russia, following their invasion of Ukraine have interrupted traditional supply dynamics for the fuel. In similarity to gasoline, the EIA expects enhanced global refinery capacity to lead to lower diesel prices through 2023 and 2024.