Light at the end of the tunnel? Improved global oil flows and rising production could reduce fuel costs for farmers and agricultural businesses across North America.
The U.S. Energy Information Administration (EIA) is forecasting a significant recovery in global oil production following renewed stability in one of the world's most important energy shipping corridors.
In its July Short-Term Energy Outlook, the agency increased expectations for global crude oil output after a memorandum of understanding between the United States and Iran helped ease tensions and restore shipping activity through the Strait of Hormuz.
The improved outlook is expected to boost global energy supplies and put downward pressure on oil, gasoline, and natural gas prices through 2027.
For farmers and agribusinesses, lower fuel and energy costs could translate into meaningful savings on operating expenses, transportation, and crop production.
Oil Production Expected to Return to Pre-Conflict Levels
According to the EIA, shipping traffic through the Strait of Hormuz has increased following the June 18 agreement aimed at ending months of conflict and reopening the vital trade route.
The agency now expects global crude oil production and trade flows to recover to near pre-conflict levels by the end of 2026. Most oil production that was curtailed during the disruption is forecast to return online by the first quarter of 2027.
The Strait of Hormuz remains one of the most strategically important waterways for global energy markets, serving as a major transit point for oil exports from the Middle East. Any improvement in the reliability of shipments through the region typically helps stabilize global supplies and moderate price volatility.
Crude Oil Prices Projected to Continue Falling
As more supply enters the market, the EIA expects crude oil prices to trend lower.
Brent crude oil, the international benchmark, averaged US$85 per barrel in June. That represented a decline of US$22 per barrel from May and US$32 below the peak reached in April 2026.
Looking ahead, the EIA forecasts Brent crude prices will average US$74 per barrel during the third quarter of 2026, substantially below projections made just one month earlier.
The agency believes increasing global inventories and slowing stock drawdowns will continue to weigh on prices over the next year. By 2027, Brent crude is expected to average approximately US$65 per barrel.
For agriculture, lower oil prices often help reduce diesel costs, transportation expenses, grain drying costs, and other fuel-related expenditures that affect farm profitability.
Gasoline Prices Also Expected to Decline
Consumers and businesses could see additional relief at the pump.
The EIA forecasts average U.S. retail gasoline prices will decline from US$4.21 per gallon during the second quarter of 2026 to approximately US$3.80 per gallon in the third quarter.
Prices are expected to move even lower by the fourth quarter, averaging about US$3.40 per gallon as gasoline inventories rebuild and seasonal summer demand fades.
For all of 2027, the agency expects average U.S. gasoline prices to fall below US$3.10 per gallon.
Natural Gas Outlook Improves
The EIA also projects softer natural gas prices over the next two years.
Record levels of U.S. natural gas production are expected to meet growing demand while keeping supplies abundant. Henry Hub spot prices are forecast to average approximately US$3.70 per million British thermal units (MMBtu) during 2026 before easing to below US$3.50 per MMBtu in 2027.
Lower natural gas prices can benefit agriculture through reduced energy costs for grain drying, greenhouse operations, fertilizer manufacturing, and other energy-intensive activities.
What It Means for Agriculture
Energy remains one of the most significant input costs across the agricultural supply chain. From diesel-powered field equipment and trucking fleets to fertilizer production and food processing, fuel prices influence nearly every stage of agricultural production.
The latest EIA outlook suggests that improving global oil supplies and stronger energy market stability could help ease cost pressures that producers have faced over the past several years.
While geopolitical risks remain and energy markets can change quickly, the current forecast points toward a more favourable cost environment for farmers, ranchers, input suppliers, and rural businesses heading into 2027.
If the projections hold, lower fuel and energy prices could provide an important boost to farm margins at a time when many producers continue to manage tight profitability and uncertain commodity markets.
Photo Credit: Pexels - Raphael Loquellano