New data from the U.S. Energy Information Administration (EIA) shows output rose by about 3 per cent, or 350,000 b/d, compared to 2024. The increase came despite a 5 per cent drop in active rigs and fewer wells drilled, highlighting a structural shift in how U.S. producers are growing supply.

The gains reinforce the United States’ position as the world’s largest oil producer and contribute to expectations of a global supply surplus. Reuters has reported that rising U.S. output is a key factor behind forecasts of an oversupplied global market, with production expected to average roughly 13.6 million b/d in 2025.

Efficiency offsets lower prices

The 2025 production increase came as benchmark West Texas Intermediate (WTI) crude prices fell to about $65 per barrel, down from $77 in 2024. Normally, lower prices would dampen output, but U.S. producers continued to extract more oil from fewer wells.

New wells added 2.9 million b/d of production in 2025, while existing wells accounted for 8.3 million b/d. Industry analysts have increasingly pointed to productivity gains — including longer laterals, improved fracking techniques, and better data analytics — as the main driver of growth.

Bloomberg has similarly reported that U.S. shale producers are pumping more oil per dollar invested, allowing output to rise even as capital spending and rig counts decline.

This decoupling of production from drilling activity marks a significant evolution in the shale sector, where companies have shifted focus from rapid expansion to capital discipline and efficiency.

Permian dominates growth

As in previous years, the Permian Basin remained the engine of U.S. production growth. Output in the region rose by 280,000 b/d in 2025 to reach 6.6 million b/d — nearly half of total U.S. supply.

Low breakeven costs continue to underpin Permian growth. According to the Dallas Fed Energy Survey, operators in the Midland and Delaware basins reported breakeven prices of roughly $61–$62 per barrel in 2025, below the annual average oil price. That cost advantage has allowed producers to sustain output even in a weaker price environment.

By contrast, other major shale regions showed limited growth. Production in the Eagle Ford rose modestly to 1.2 million b/d, while the Bakken saw a slight decline to a similar level.

Together, the Permian, Eagle Ford, and Bakken account for nearly two-thirds of total U.S. crude production.

Offshore projects add supply

Production in the Gulf of America also contributed to overall growth, rising by 111,000 b/d to average 1.9 million b/d in 2025.

Five new offshore projects — Whale, Ballymore, Dover, Shenandoah, and Leon-Castile — came online during the year. Unlike shale operations, offshore developments are less sensitive to short-term price fluctuations due to their long lead times and high upfront capital costs.

This steady pipeline of offshore projects is helping to diversify U.S. supply growth beyond shale basins.

Global implications

The global outlook for oil markets has shifted rapidly in recent weeks. The war in Iran and severe disruptions to shipping through the Strait of Hormuz — which typically carries about one-fifth of global oil — have tightened supply and driven prices sharply higher. With tanker traffic collapsing and infrastructure under attack, the market is moving away from fears of oversupply toward a more constrained and volatile environment.

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By Philippe Le Billon

War is costly. The ongoing American-Israeli war on Iran is already reverberating through the global economy. For most people, including American citizens, it means higher fuel prices and greater economic uncertainty.

But for a narrower group of entities, war can also be extraordinarily profitable. Chief among them are segments of the United States oil and gas industry, which have already profited from Russian President Vladimir Putin’s decision to invade Ukraine and the ensuing sanctions on Russian oil and gas exports.

Now, the escalation of hostilities between the U.S., Israel and Iran has once again rattled global energy markets. Fighting and the closure of the Strait of Hormuz — one of the world’s most important oil shipping routes — have triggered what some have described as “the biggest oil disruption in history.”

Read more: What is the Strait of Hormuz, and why does its closure matter so much to the global economy?

By early March, oil prices had briefly surged to US$119 per barrel — roughly double their level at the end of 2025. Prices have since settled at near US$100 a barrel, though volatility remains.

The escalation illustrates a familiar pattern in the political economy of fossil fuels: public costs paired with private windfalls.

The shock to global energy markets

Three months ago, few analysts expected 2026 to be a particularly profitable year for fossil fuel producers. Global supply was expanding rapidly and U.S. gas prices were expected to fall below US$3 a gallon.

Production growth in the U.S., Canada, Brazil and Argentina was colliding with weaker demand growth and the ineffectiveness of sanctions on exports from Russia, Iran and Venezuela. Many analysts warned of an emerging glut that could push prices downward. The International Energy Agency, for instance, projected a potential global oil surplus of nearly four million barrels per day in 2026.

That outlook changed abruptly following the U.S.-Israeli attack on Iran and the country’s retaliatory attacks on energy infrastructure and tanker traffic through the Strait of Hormuz, a strategic chokepoint that normally carries roughly one-fifth of the world’s traded oil and natural gas.

Even a partial disruption carries immediate consequences.

Though the strait has been a cornerstone of U.S. and world energy security for more than 60 years, the Donald Trump administration apparently underestimated the possibility that the Iranian regime would blockade it and pummel U.S.-allied countries in the region.

For consumers and most businesses, such price spikes function as a tax. Higher energy costs ripple through transport, food production, manufacturing and household budgets. American drivers feel the impact at the pump, while industries dependent on fuel or petrochemicals see their operating costs climb.

The hidden household costs of war

Estimates suggest that for every increase of US$10 per barrel, additional fuel costs amount to roughly US$560 per year per American household, including costs embedded in goods and services.

If prices remain at around US$86 instead of the expected US$51 forecast for 2026, the added burden could reach about US$2,000 per household annually.

These figures do not include the direct military expenditures, which were conservatively estimated at US$11 billion for the first week of strikes against Iran.

Even military spending of US$200 million per day (10 times less than the highest estimates at the current intensity) would amount to an additional cost of US$541 per household annually.

In short, a prolonged war combining high energy prices and sustained military expenditures would likely amount to between three to four per cent of the median U.S. household expenditure — roughly half of what many families spend annually on food or health care.

Lessons from recent wars

Recent history offers revealing precedents.

The costs of the Iraq War (2003 to 2011) for Americans has been estimated at about US$1.2-3 trillion in total long-term costs, equivalent to about US$16,700 to US$41,750 per household in current U.S. dollars. Yet the war did achieve the goal of reopening access to Iraqi oil fields for American oil companies.

More recently, the invasion of Ukraine by Russia cost an estimated one per cent of global GDP in 2022 and added 1.5 per cent to global inflation in 2022-23. Ukraine, of course, paid the largest price for the war, but direct impacts in Europe amounted to about 1 trillion euros.

Much of these costs ultimately translated into profits for oil and gas companies, especially liquefied natural gas (LNG) companies from the U.S. and producers in Australia and the Gulf states.

Profits on a single LNG shipment from the U.S. to Europe increased fivefold from about US$17 million to US$102 million.

A similar dynamic is now unfolding again.

Who really benefits from rising oil prices?

This time, with major Gulf states themselves exposed to the conflict, U.S. and other exporters less directly affected by the war may have even greater room to increase profits. American LNG companies could see windfalls approaching US$20 billion per month.

The main lesson is that petro-states, including Iran, Russia and the U.S., don’t hesitate to go to war partly because they believe oil revenues will bail them out, if not further enrich them.

In fact, in seeking to justify the attack on Iran and the continuation of the conflict, Trump argued that “the United States is the largest oil producer in the world, by far, so when oil prices go up, we make a lot of money.”

This, of course, depends on who “we” refers to. The populations of most petro-states have paid dearly for the wars involving their countries, whether it’s been Angola, Chad, Iraq, Libya, Nigeria, Russia, Syria and now Iran.

The U.S. has fared much better economically, but the gains have been mostly for its companies, not its population. Higher oil and natural gas prices generate enormous revenues for U.S. oil producers and LNG exporters along the Gulf Coast as global gas markets tighten. Investors and shareholders in these sectors stand to gain from rising margins and market valuations.

American households, however, face the opposite effect. Fuel prices rise. Inflationary pressures intensify. Transport and heating costs increase.

The gains accruing to producers are therefore not only partially financed by the most import-dependent countries with the least strategic reserves but also by low-income households who are stuck in a carbon-intensive economy they can least afford to escape.

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By Mitchell Beer

Donald Trump’s weekend raid on Venezuela has analysts debating how quickly the country can restore some of its past oil production, how much that activity will benefit Trump’s fossil industry donors and allies, and whether the White House agenda is about extracting more oil or asserting global power in a glutted oil market.

Meanwhile, national leaders from Colombia and Cuba to Canada, Greenland, and Denmark are reacting to a new geopolitical reality as Trump’s agenda for Western Hemisphere domination comes into sharper focus.

Venezuela holds the largest oil reserves in the world, at an estimated 303 billion barrels. At the media conference Saturday where he announced that U.S. forces had kidnapped Venezuelan President Nicólas Maduro and his wife, Cilia Flores, to stand trial in New York, Trump was clear about the plan, though not so much about how he expected to deliver on it.

“We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country,” he told media.

If that happens, it’ll also deliver a financial windfall to Trump’s billionaire supporter Paul Singer, co-CEO of Elliot Investment Management, which indirectly owns Citgo—a U.S.-based subsidiary of Venezuela’s state oil company that in turn owns three refineries on the U.S. Gulf Coast, 43 oil terminals, and a network of more than 4,000 independently-held gas stations, Popular Information reported Monday.

A New Balance of Power

Trump’s top-line message ricocheted through North American fossil fuel markets on Monday. Canadian oil sands giants Suncor Energy, Cenovus Energy, and Canadian Natural Resources Ltd. initially lost 4% to 7% of their share value before recovering somewhat through the day, CBC reports. That was because “refineries on the U.S. Gulf Coast are set up to process heavy crude like that produced in Alberta’s oil sands and in Venezuela,” The Canadian Press explains. “U.S. sanctions on the South American country have meant virtually none of its supplies go to the U.S. market today.”

But “if those restrictions were lifted, then Canada may have more competition right away in terms of Venezuelan oil that now technically can access the U.S. Gulf Coast,” Jackie Forrest, executive director of the ARC Energy Research Institute, told the news agency.

In the U.S., shares in Chevron Corporation, which operates in Venezuela, and ExxonMobil, which did in the past, moved “sharply higher”, The Associated Press writes, with analysts at JPMorgan projecting Monday that the U.S. takeover could “reshape the balance of power in international energy markets.”

And yet, “not much has changed in oil markets near-term and it could be months or even years before the fate of sanctions and Venezuela’s production shakes out,” CP writes, citing Dane Gregoris, managing director of the oil and gas research group with the Enervus analytics platform.

“Political changes happen quickly, but industrial changes happen very slowly,” he said.

Despite many years of international sanctions and poor maintenance of its oilfield infrastructure, “some oil industry analysts believe Venezuela could double or triple its current output of about 1.1 million barrels of oil a day and return the nation to historic production levels relatively quickly,” AP adds. “If or when that would happen, however, is more complex. Many energy analysts see a longer and more difficult road ahead.”

Bloomberg opinion columnist Javier Blas says Trump has set out to build “his very own oil empire,” with political sway over available reserves in the U.S., Latin America, and Canada. “Like it or not, all of them are living under the ‘Donroe Doctrine’—an increasingly belligerent Washington’s sphere of influence over the Americas,” he writes. “Together they account for nearly 40% of the world’s oil output” and 20% of global reserves, giving him “an economic and geopolitical lever no U.S. president has had since Franklin D. Roosevelt in the 1940s.”

Citing two sources from outside that sphere of influence, a U.S.-sanctioned Russian oligarch and a Kremlin envoy, Blas opines that “having de facto control of the Western Hemisphere’s petroleum wealth is a geopolitical game changer. For decades, U.S. military adventurism was constrained by the impact of any war on energy costs. Today the White House has primacy over oil-producing allies and adversaries alike—whether it’s Saudi Arabia or Iran, Nigeria or Russia.”

Fossils May Not Play Along

But not all analysts agree that U.S. fossil companies are likely to play along.

“For weeks, Trump has been courting oil companies, promising them a glorious return to Venezuela,” after the country “seized private assets decades ago in its push to nationalize the petroleum industry,” Politico Power Switch writes. The Maduro/Flores kidnapping “comes as a down payment of sorts to the industry—though not necessarily one that the U.S. oil majors are eager to collect.”

U.S. fossils have “longed” to re-establish their operations in petrostate Venezuela, Politico says, and Trump cabinet secretaries Chris Wright and Doug Burgum are now arm-twisting them to do just that. But “rebuilding decayed oil fields in a still socialist-led country amid a global oil glut is few people’s idea of a good time,” the news analysis states. “It’s likewise unclear how the U.S. would guarantee the safety of employees and equipment, how companies would be paid, and whether oil prices will rise enough to make Venezuelan crude profitable.”

Moreover, as the global oil industry “continues to stare down the prospect of a broad transition to renewable energy,” it’s “not obvious that future markets can justify a surge of investment in Venezuela,” says Grist staff writer Jake Bittle. “While there are buyers for additional oil that could be pumped in Venezuela—some of them on the U.S. Gulf Coast—experts say a total revival on the order that Trump is promising may not be in the cards.”

The market for heavy oil from Venezuela (or from Alberta, for that matter) is limited, and while analysts have different ideas about when global oil demand will start to decline, they mostly agree that the peak is coming, Bittle writes. “At that point, there may no longer be sufficient demand to keep exploiting new oil fields, no matter how large. And given that it will take many years just to update the infrastructure that will allow for increased oil production in Venezuela in the first place, investors may decide that the juice is not worth the squeeze.”

‘Northwards of $100 Billion’

On LinkedIn Monday, Patrick Galey, head of fossil fuel investigations at Global Witness, said it would cost “northwards of $100 billion just to get Venezuelan output back up to two million barrels per day (still less than half of Texas’ daily production). And the only player still there, Chevron, is notoriously cost averse these days.”

More likely, Galey adds, “this is a play to boost oil prices at a time when the world faces a 3.8-million-barrel-per-day oversupply (yes, really) of a product, demand for which is in terminal decline and U.S. production productivity of which has been trending downwards for a while now.”

Maria Pastukhova, programme lead, global energy transition at the London- and Brussels-based E3G energy transition think tank, agreed that restoring Venezuela’s oil infrastructure would be “slow, expensive, and risky” at a time when “the global oil market is well supplied, demand growth is fading, and China is signalling an approaching demand peak.” That means “control over Venezuelan oil is less about adding supply and more about geopolitical optionality. A U.S.-aligned Venezuela is unlikely to unleash a wave of new production, but it would significantly reduce access for China, Russia, and Iran, weakening their geopolitical leverage.”

Small wonder that the loss of a key ally had China strongly condemning the U.S. action Saturday. In a foreign ministry statement, Beijing said it was “deeply shocked by and strongly condemns the U.S.’s blatant use of force against a sovereign state,” the Globe and Mail reports. China described the raid and kidnapping as “hegemonic acts” that “threaten peace and security in Latin America and the Caribbean region.”

Trump’s Emerging Doctrine: ‘Strike, Then Coerce’

Over the last 72 hours, multiple analysts have cast Trump’s action as tangible proof of a new geopolitical doctrine. The raid in Caracas “capped a month of aggressive military action by Trump that also included targeting alleged extremists in northern Nigeria, attacking Islamic State militants in Syria, and threatening to restrike Iran,” the Wall Street Journal reports—not to mention repeated, controversial air strikes on fishing boats alleged to be carrying drugs in the Caribbean Sea and East Pacific Ocean.

“The flurry of military moves underscored Trump’s reliance on the surprise use of force during his second term,” the WSJ adds, “an emerging doctrine to strike and then coerce that is likely to be sorely tested as the White House seeks to press Venezuela and other countries he targets to comply with his demands.”

Within not many hours, Trump was threatening additional targets, including Colombian President Gustavo Petro, Cuba, Mexico, and Greenland. Over the weekend, he claimed Cuba “is in a lot of trouble,” while the U.S. “needs” Greenland for the sake of national security.

Trump’s statements had Mexican President and former IPCC scientist Claudia Sheinbaum categorically rejecting the U.S. intervention. “Unilateral action and invasion cannot be the basis for international relations in the 21st century,” she said in a three-page statement Monday. “They lead neither to peace nor to development.”

In Copenhagen, Greenlandic Prime Minister Jens-Frederik Nielsen and Danish Prime Minister Mette Frederiksen told Trump to stop threatening a takeover of Greenland, with Frederiksen warning that an attack on the semi-autonomous Danish territory would mean an end to the NATO military alliance.

“If the United States chooses to attack another NATO country militarily, then everything stops,” she told Danish TV Monday. “That is, including our NATO and thus the security that has been provided since the end of the Second World War.”

Canada’s former UN ambassador Bob Rae told CBC there’s “absolutely no room for complacency” in Ottawa’s response to the attack, adding that Trump claiming ownership over the entire Western Hemisphere amounts to “nonsensical” overreach.

“What the hell is this?” he asked. “You can’t unilaterally declare that you have unique jurisdiction over an entire half of the world, and all the people who live in that half of the world just have to put up or shut up.”

But Prime Minister Mark Carney’s statement Saturday was far more cautious, leading with a critique of Maduro’s “brutally oppressive and criminal regime” before calling for a “peaceful, negotiated, and Venezuelan-led transition process” that respects the democratic will of the country.

“In keeping with our long-standing commitment to upholding the rule of law, sovereignty, and human rights, Canada calls on all parties to respect international law,” Carney said. “We stand by the Venezuelan people’s sovereign right to decide and build their own future in a peaceful and democratic society.”

With Carney meeting European and British leaders in Paris to discuss security guarantees for Ukraine, foreign policy experts are urging the countries to “send a strong signal” against Trump’s action, the Globe and Mail reports.

“If we’re seen as condoning this, it’s giving a hunting licence to Putin and quite frankly Xi when it comes to Taiwan,” said Fen Hampson, chancellor’s professor and professor of international affairs at Carleton University. “It is not in our interest to revert to the law of the jungle, and it is not in the interests of the other countries that are meeting in Paris to revert to the law of the jungle. It’s time to send a message to Washington: We don’t like this.”

“There’s safety in numbers” for western leaders to defend “fundamental principles such as sovereignty, international law, and the non-use of force, unless there’s a credible reason, including self-defence, to intervene militarily in another country’s affairs,” agreed international affairs professor Roland Paris, director of the Graduate School of Public and International Affairs at the University of Ottawa.

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By Toril Bosoni, Head of Oil Industry and Markets Division

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By Alexander de Keyserling

The retail price for regular-grade gasoline in the United States on May 19, the Monday before Memorial Day weekend, averaged $3.17 per gallon (gal), 11 per cent (or 41 cents/gal) lower than the price a year ago. After adjusting for inflation (real terms), average U.S. retail gasoline prices going into Memorial Day weekend are 14 per cent lower than last year, largely because crude oil prices have fallen.

Memorial Day weekend is one of the biggest travel weekends of the year, and many of those travelers will go by car. The American Automobile Association (AAA) expects 39.4 million people will travel by car over Memorial Day weekend this year, an increase of 3 per cent compared with last year.

Substantially lower crude oil prices—which are the main component of retail gasoline prices—have kept retail gasoline prices lower than usual going into spring. From May 1 to May 19, Brent crude oil prices averaged $64 per barrel (b), 20 per cent less in real terms than in January and 26 per cent less than in May 2024. Concerns about future economic growth, record-high U.S. crude oil production, and, more recently, announcements that OPEC+ will accelerate crude oil production increases have contributed to falling crude oil prices.

Retail gasoline prices on the Monday before Memorial Day weekend are only 4 per cent (or 13 cents/gal) higher than on the first Monday of January. Retail gasoline prices typically increase much more than that as gasoline demand increases going into the summer driving season and retailers are required to start selling more expensive summer-grade gasoline. Over the last 10 years and excluding 2020, retail gasoline prices increased 19 per cent (or 49 cents/gal) on average from January to May.

U.S. gasoline prices vary regionally, reflecting local supply and demand conditions, state fuel specifications, and state taxes. Retail gasoline prices are usually the highest on the West Coast because of:

• The region’s limited connections with other major refining centres
• Tight local supply and demand conditions
• Higher-than-average state taxes in several West Coast states
• Gasoline specifications for California that make gasoline more costly to manufacture

On May 19, West Coast prices averaged $4.29/gal, down 10 per cent in real terms from this time last year.

Gasoline prices on the Gulf Coast are usually the lowest of any U.S. region. Gulf Coast states are home to more than half of U.S. refining capacity, and more gasoline is produced than is consumed in the region. Gulf Coast states also have lower gasoline taxes than the national average. Gulf Coast prices on May 19 averaged $2.79/gal, down 13 per cent from this time last year.

On the East Coast, which has the most gasoline demand of the five regions, retail gasoline prices averaged $2.99/gal, down 17 per cent from 2024.

Prices are also down in the Midwest and the Rocky Mountains compared with last year. Midwest prices averaged $3.03/gal, down 15 per cent from the previous year, and Rocky Mountains prices averaged $3.13/gal, down 12 per cent from 2024 after adjusting for inflation.

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By Jeff Barron and Sean Hill

We increased our forecast prices for crude oil and petroleum products for the remainder of 2024 in our March Short-Term Energy Outlook (STEO) following the announcement that OPEC+ will extend the existing voluntary production cuts through the second quarter of 2024. We now forecast significantly less global oil production than world oil consumption through the first half of 2024, requiring draws on world petroleum stocks (inventory). Stock draws tend to increase oil prices.

We reduced our forecast for world oil production in the second quarter of 2024 (2Q24) to 101.3 million barrels per day (b/d) in the March STEO in response to OPEC+ extending its cuts. That results in global oil production that is 0.9 million b/d less than our forecast of 102.2 million b/d for world oil consumption. Although we expected some OPEC+ countries to continue to restrict production, we expect the March 3 announcement to result in larger cuts to production than we had previously assumed. The announcement includes an additional voluntary production cut from Russia.

The current OPEC+ agreement includes two types of production cuts. The first type is officially stated production targets, and the second type is additional voluntary cuts pledged by certain OPEC+ countries. Although our previous forecast assumed that some OPEC+ members would maintain voluntary cuts—which had been set to expire after 1Q24—through 2Q24, this new announcement pledges that cuts will be continued for all member countries through the first half of 2024. Because OPEC+ did not relax production targets and because Russia added new voluntary production cuts, market participants will have to withdraw oil from stocks to meet demand, which puts upward pressure on oil prices.

The draw on global oil stocks during 2024 will keep Brent crude oil prices elevated, averaging $88/b in 2Q24, $4/b higher than we had forecast in the February STEO. Prices will remain relatively flat for the rest of the year before falling to $82/b by the end of 2025 as OPEC+ supply cuts expire and production increases.

Several factors present uncertainties to our forecast:

• Geopolitical tensions. No crude oil or product tankers have been lost because of the ongoing attacks on commercial shipping in the Red Sea, but many ships are rerouting to avoid the area. Rerouting lengthens the trip and increases costs. Attacks continue to pose a threat to ships that transit the Red Sea, which could increase prices further.
• OPEC+ compliance. If some countries do not comply with the latest round of voluntary OPEC+ production cuts, it would increase the amount of oil in the market, which would reduce prices.
• World oil consumption and economic growth. Stronger demand growth than our forecast would reduce global stocks and raise oil prices, just as less demand growth would increase global stocks and reduce prices.

Crude oil prices make up more than 50 per cent of U.S. retail gasoline prices. Refining costs fluctuate seasonally but usually determine between 10 per cent–25 per cent of the retail gasoline price. Distribution costs and taxes make up the rest. Following large planned and unplanned refinery outages in the United States in recent weeks, we increased our refining margin forecast, which is the difference between the wholesale gasoline price and the Brent crude oil price. Both higher crude oil prices and refining margins led us to increase our regular-grade retail gasoline price forecast by 20 cents per gallon for June, July, and August from what we forecast in the February STEO.

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By Kevin Hack

In our January Short-Term Energy Outlook (STEO), we expect average U.S. retail gasoline prices to decrease in 2024 because of increased inventories related to increased refinery capacity. In 2025, we expect slightly reduced gasoline consumption to further decrease prices. We expect similar supply-side factors to lower retail diesel prices in 2024 and 2025, although U.S. diesel consumption will likely exceed 2023 in both 2024 and 2025.

We expect crude oil prices in 2024 to be similar to those in 2023. As a result, our lower gasoline and diesel price outlooks next year reflect narrowing crack spreads, the difference between the wholesale prices of gasoline and diesel compared with crude oil. Crack spreads reflect the price of refining, and a lower crack spread indicates lower refining cost. Our lower forecast crack spread for gasoline is driven by our expectation of increasing availability of supply even as consumption is reduced.

In 2023, additional refinery capacity came online, raising U.S. operable refinery capacity from 18.06 million barrels per day (b/d) in January 2023 to 18.31 million b/d in December 2023. We expect the availability of the new refinery capacity will ease price pressure on petroleum products in 2024. In 2025, we expect lower crude oil prices, which will also reduce gasoline and diesel prices.

New international production from refineries in the Middle East, particularly Kuwait, have also increased the pool of gasoline and diesel on world markets. Increasing global refined products supply will contribute to easing international price pressure on both fuels. We expect gasoline consumption to remain relatively flat in 2024 and to decrease only slightly in 2025, by less than 1%. In both years, we expect slowing but consistent economic growth. Flat or decreasing gasoline consumption despite economic growth is relatively uncommon. Since 1990, gasoline consumption has declined amid positive economic growth in only two years (2010 and 2012).

Although we expect more diesel production and less strain on U.S. and global inventories to reduce diesel prices in 2024 and 2025, we also expect annual U.S. average diesel consumption to grow modestly, by 1.3%, or about 50,000 b/d, in 2024 supported by continuing economic growth.

Our forecast for gasoline and diesel prices is subject to significant uncertainty, including any factors that might affect crude oil prices and pass through to retail fuel prices. In addition, prices could be higher if more unplanned refinery shutdowns, further disruptions to international trade flows, or new logistical bottlenecks that hinder the movement of fuels between regions occur. By early 2025, we currently expect LyondellBasell’s Houston refinery in Texas will close and Phillips 66’s Rodeo refinery in California will complete its ongoing conversion to renewable diesel production, although the timing of both may vary based on market conditions and the schedules of the owners.

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By Matthew French

In our August Short-Term Energy Outlook (STEO), we increased our forecast for U.S. crude oil production in the Lower 48 states (L48) in 2023 and 2024 because of higher well productivity and higher forecast crude oil prices than we had previously expected.

In our August STEO, we forecast that crude oil production in the L48 in the second half of 2023 will average 10.6 million barrels per day (b/d), up 360,000 b/d from the July STEO. We increased our forecast L48 crude oil production for 2024 by 240,000 b/d from the July STEO to 10.8 million b/d.

Our U.S. crude oil production forecast increased even though rig counts have recently fallen. According to Baker Hughes, 520 oil-directed rigs were active in the United States during the week of August 18, 2023, an 81-rig decrease compared with the same week last year. However, increased well productivity has offset the decline in active rigs so far in 2023. In 2024, we expect the number of active rigs to increase, helping to grow crude oil production in the second half of the year.

Crude oil production in the Permian Basin is driving our forecast of L48 crude oil production growth. We forecast that production in the Permian Basin will increase by 430,000 b/d between January and December this year. This growth is more than our forecast total L48 production growth (410,000 b/d) during that period because production declines in other regions offset some of the forecast growth in the Permian Basin.

In the August STEO, we forecast that the price of Brent crude oil will average $87 per barrel (b) from August to December 2023, up from our July forecast of $79/b during that period. Crude oil prices increased primarily because of extended voluntary cuts to crude oil production in Saudi Arabia and our expectation of increased global demand. We expect the production cuts, combined with increasing demand, will cause global oil inventories to fall and put upward pressure on oil prices through the end of this year.

We forecast that global stock draws will average 520,000 b/d in August 2023 and 1.4 million b/d in September 2023. We forecast average global stock draws of 120,000 b/d in the fourth quarter of 2023 will help sustain oil prices in the upper-$80s during that period. In 2024, we forecast that the global supply of petroleum and liquid fuels will closely match demand and the price of Brent will average $86/b.

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By Ornella Kaze

In our Summer Fuels Outlook, a supplement to our April 2022 Short-Term Energy Outlook, we expect retail gasoline prices to average $3.84 per gallon (gal) this summer driving season, April through September, compared with last summer’s average price of $3.06/gal. After adjusting for inflation, this summer’s forecast national average price would mark the highest retail gasoline and diesel prices since 2014.

We expect the ongoing effects of the COVID-19 pandemic will have a smaller effect on gasoline and diesel consumption in the United States during the 2022 summer season compared with the past two summers. U.S. gasoline and diesel consumption continue to remain below their 2019 averages.

We expect higher fuel prices this summer as a result of higher crude oil prices. Crude oil prices have generally risen since the start of the year partly as a result of geopolitical developments, particularly Russia’s war against Ukraine.

We expect U.S. economic activity to increase through the summer, resulting in more demand for petroleum fuels. Greater demand will contribute to higher crude oil prices. We expect Brent crude oil will average $106 per barrel (b) this summer, which would be $35/b higher than last summer.

Recently, increased volatility of crude oil prices, which account for around 60 per cent of total retail gasoline prices, indicates our crude oil price forecast could change, depending on several factors that remain highly uncertain. Notably, our outlook takes into account all sanctions on Russia announced as of April 7, but the range of possible outcomes for resulting oil production in Russia is wide.

Gasoline and diesel prices have already declined since their peaks in March, when the U.S. average gasoline price surpassed $4.00/gal and the average diesel price surpassed $5.00/gal. We expect these prices to continue falling throughout the summer.

As U.S. refineries increase gasoline and distillate production, we expect this increased production to gradually place downward pressure on wholesale gasoline margins and retail prices during the summer. As a result, we forecast the average U.S. retail gasoline price will fall to $3.75/gal in July and to $3.68/gal in September. Similarly, we expect the average U.S. retail diesel price to fall to $4.44/gal in July and $4.20/gal in September.

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This article was published by the US Energy Information Administration on Mar. 16, 2020.

Markets for oil, as well as other commodities and equities, have experienced significant volatility and price declines since the final week in February amid concerns over the economic effects of the 2019 novel coronavirus disease (COVID-19).

More recently, markets fell after the Organization of the Petroleum Exporting Countries (OPEC) and partners failed to reach an agreement to continue crude oil production cuts.

The U.S. Energy Information Administration (EIA) has focused on several underlying assumptions about OPEC’s posture regarding targeted production output and what effect it may have on global oil balances and prices.

In its March Short-Term Energy Outlook (STEO), EIA forecasts Brent crude oil prices will average $43 per barrel (b) in 2020, down from an average of $64/b in 2019. For 2020, EIA expects prices will average $37/b during the second quarter and rise to $43/b during the second half of the year.

EIA forecasts that Brent prices will rise to an average of $55/b in 2021 as a result of declining global oil inventories putting upward pressure on prices. EIA expects that global liquid fuels inventories will grow by an average of 1.0 million barrels per day (b/d) in 2020 after falling by about 0.1 million b/d in 2019 and that inventory builds will be largest in the first half of 2020, rising at a rate of 1.7 million b/d.

After the March 6 meeting, OPEC and partner countries announced that they did not agree to extend production cuts beyond those currently expiring March 31, 2020.

EIA no longer expects active production management to target balanced global oil markets among OPEC members and partner countries. These countries have been limiting production under the Declaration of Cooperation, initially agreed to in December 2016.

Because of the outcome of the March 6 OPEC meeting, EIA increased its OPEC liquid fuels production forecast by 150,000 b/d in 2020 and by 200,000 b/d in 2021 from the February STEO. EIA expects OPEC crude oil production will average 29.1 million b/d in the second and third quarters of 2020, up from 28.7 million b/d in the first quarter.

Although this growth is a relatively small increase in a market where global production exceeded 100 million b/d in 2019, this production level represents a marked change from recent production targets that were focused on keeping global inventories near the five-year (2015–19) average.

OPEC’s current strategy appears to be focused on regaining market share by elevating production levels to the point that the resulting depressed prices limit production growth from other market participants, particularly non-OPEC producers.

In addition, the increase in OPEC production is significant in light of the downward revisions to the outlook for global demand resulting from COVID-19.

In recent STEO forecasts, EIA adjusted the outlook for OPEC total liquids supply based on changes in demand and non-OPEC supply to maintain global inventories that were at or near the five-year average.

In the March STEO, EIA no longer assumes that OPEC production levels will follow such a pattern and now expects significant inventory builds through 2020.

One way to look at these related patterns is to compare the call on OPEC with OPEC crude oil production. The call on OPEC represents the OPEC crude oil production level that would balance the global market. It is calculated as total global liquid fuels consumption minus non-OPEC supply minus OPEC other liquids production.

When OPEC output exceeds the call on OPEC, global inventories increase, much like in 2014 through the end of 2016. From 2017 through 2019, the call on OPEC steadily declined as non-OPEC production, primarily in the United States, grew significantly.

EIA forecasts OPEC production will exceed the call on OPEC in 2020—largely because of the significant decline in global liquids demand—contributing to inventory builds.

Production levels targeted by OPEC amid low oil demand are very uncertain, and realized levels will have a significant effect on crude oil prices. Because OPEC surplus capacity is more than 2.0 million b/d, member countries could produce far more than EIA currently forecasts, which would lead to larger inventory builds and put downward pressure on prices.

On the other hand, higher-than-expected crude oil production outages could reduce supply and put upward pressure on prices. Crude oil production in Libya has declined by 1.0 million b/d since December 2019, and EIA estimates February production in Libya averaged 150,000 b/d. Total unplanned OPEC production outages averaged 3.84 million b/d in February and included additional outages in Iran, Kuwait, Nigeria, and Saudi Arabia

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