EIA Projects Declining Oil and Gasoline Prices as OPEC+ Increases Production

In its September Short-term Energy Outlook (STEO), the Energy Information Administration (EIA) expects oil and gasoline prices to decline this year and to fall further next year, falling from $68 per barrel in August to $59 per barrel on average in the fourth quarter of 2025, and further declining to around $50 per barrel in early 2026. Gasoline prices are expected to average about $3.10 per gallon this year, down 20 cents per gallon from last year, and fall to an average of $2.90 per gallon in 2026. All regions, except the West Coast, are expected to see prices below $3.00 per gallon next year. California gasoline prices have been averaging $1.50 a gallon above the national average, despite California recently passing legislation to increase onshore oil drilling. The state’s anti-fossil fuel policies have caused two refineries to announce closures — one this year and one next year.

The EIA’s lower oil price forecast is mainly due to large oil inventory builds as OPEC+ members increase production. Though not included in the forecast, OPEC+ recently announced production increases of 137,000 barrels per day beginning in October to supplement its other increases beginning in April. The EIA expects global oil inventory builds will average more than two million barrels per day through the first quarter of 2026, after which a reduction in output by both OPEC+ and some non-OPEC producers is expected to moderate inventory builds.

Global liquids consumption is expected to increase to 103.8 million barrels per day in 2025 and 105.09 million barrels per day in 2026, increasing by 0.9 million barrels per day in 2025 and 1.3 million barrels per day in 2026, driven almost entirely by non-OECD countries. Most non-OECD growth is concentrated in Asia, with liquid fuels consumption in India and China each growing by between 0.4 million barrels per day and 0.5 million barrels per day from 2024 through 2026.

U.S. gasoline consumption is expected to average 8.9 million barrels per day in 2026, up slightly from 2025, due to the lower price forecast and an upward revision by the Census Bureau of the working age population by 500,000 workers. The EIA expects vehicle miles traveled in 2026 to increase by 0.7%, up from a 0.2% increase in the previous STEO, which is expected to increase gasoline consumption.

IEA Strikes a Different Tune

The International Energy Agency (IEA), in contrast to its net-zero forecasts, is now indicating that new investment in oil and gas is needed to maintain output levels amid faster decline rates at existing fields due to higher reliance on shale and deep offshore resources. In a recent report, the IEA indicated that, in order to maintain current levels of production, more than 45 million barrels per day of oil and around 2,000 billion cubic meters of natural gas would be needed in 2050 from new conventional fields, requiring investment of $540 billion each year through 2050. It said a large gap exists even with projects ramping up and others approved for development and not yet in production. In the absence of upstream investment in oil, the equivalent of Brazil and Norway’s combined production each year would be removed from the global market balance. Finally, the IEA agrees with the oil industry, which has been indicating for years that underinvestment threatens global energy supply.

Trump Advocates for More U.S. Oil Sales

President Trump wants countries to stop buying Russian oil to help put an end to the Russia-Ukraine war and is advocating for countries to buy more from U.S. companies. On their recent tour of Europe, Energy Secretary Chris Wright and Interior Secretary Doug Burgum indicated their plans to expand U.S. fossil fuel exports, stating that they were crucial to “peace and prosperity.” According to the New York Times, their mission in Europe was to secure contracts to sell more American fossil fuels and lobby the European Union to loosen environmental regulations that are too onerous. As part of the European Union’s trade deal with the Trump administration, it agreed to purchase $750 billion of American energy, mostly oil and gas, over the course of President Trump’s term in office.

President Trump believes the Russian-Ukraine war would end if all NATO countries stopped buying oil from Russia and placed tariffs on China of 50% to 100% for its purchases of Russian petroleum. Since 2023, NATO member Turkey has ranked as the third-largest buyer of Russian oil, importing an estimated $80 billion worth of Russian oil since February 2022 — only behind China and India. Other NATO members purchasing Russian oil include Hungary and Slovakia, which argue that reductions would compromise their energy security. Hungary’s Foreign Minister claims, “Without Russian oil and gas, a secure supply is impossible.”

Analysis

Greater production and increased supply of oil should lead to lower prices at the pump, which will be a welcome change for consumers. As OPEC continues to increase production, partially in response to increased American production, which is becoming a threat to their market share, further demand will continue to result in the need for greater investment and deregulation to meet domestic and international market demand. As a member of OPEC+, Russia is an observer of OPEC production increases and costs, but does not have to adhere to those changes. However, as one of the largest producers of oil in the world, taking their supply off the market will be noticed — the task of doing so, given Russia’s talent of circumventing sanctions, is also already significantly challenging. If Russian oil is successfully taken off the global market, while other producers such as the United States and members of OPEC can fill the gap, then the added benefit of lower oil prices will also hinder Russia’s ability to maintain the war in Ukraine.

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