Energy outlook shows falling fuel costs despite regional refinery pressures
According to the latest Short Term Energy Outlook released by the U.S. Energy Information Administration, US retail gasoline prices are expected to remain lower over the next two years compared with 2025 levels. The forecast shows gasoline prices falling by about 6% in 2026 followed by a slight increase of 1% in 2027.
Gasoline prices generally move in line with global crude oil prices which are expected to decline due to rising global oil supply. However reduced refinery capacity in the United States especially in the West Coast region may limit how much gasoline prices fall in some areas. Lower refinery output could lead to tighter fuel supplies and higher refining margins.
On a regional basis gasoline prices are expected to decrease across all U.S. regions in 2026 and rise modestly in 2027. Even with this increase, average prices in 2027 are forecast to remain below 2025 levels in most regions. The exception is the West Coast where refinery closures are expected to keep gasoline prices close to 2025 levels.
The West Coast is projected to continue having the highest gasoline prices in the country through 2027. In contrast, the Gulf Coast is expected to maintain the lowest prices followed by the Midwest region. Regional differences are influenced by refinery capacity for fuel distribution systems and local market conditions.
The forecast continues a longer-term trend of falling gasoline prices since reaching a record high of about five dollars per gallon in mid 2022. The estimated price decline of around twenty cents per gallon in 2026 is similar to decreases seen in recent years.
Crude oil prices remain the largest factor affecting gasoline prices. Historically crude oil costs accounted for slightly more than half of the retail gasoline price. In 2026 and 2027 that share is expected to fall below 45% due to lower oil prices and higher refining costs.
Refinery crack spreads which measure refinery profitability are expected to increase as gasoline inventories tighten. Even so, these margins are projected to remain below the unusually high levels recorded in 2022 and 2023.
Photo Credit: EIA - U.S. - Annual Average Retail Gasoline, Dollars per Gallon