Pump Price Relief Ahead: EIA Predicts US Gasoline to Drop to $2.90/Gallon in 2024

Get ready for some welcome news at the pump! The U.S. Energy Information Administration (EIA) is forecasting a significant drop in the average price of gasoline, predicting it will slide to a wallet-friendly $2.90 per gallon next year. This projection, detailed in the EIA's latest Short-Term Energy Outlook, offers a glimmer of hope for consumers grappling with fluctuating fuel costs.

Currently hovering around $3.67 per gallon, the anticipated decrease represents a substantial cut from previous forecasts.

Just last month, the EIA had estimated the 2024 average at $3.36 per gallon, making this new outlook a much more optimistic revision for American drivers.

What's driving this anticipated relief? The EIA points to a dual-pronged explanation. Firstly, there's a projected increase in global crude oil production, particularly from nations outside the OPEC+ alliance, with the United States playing a significant role.

More supply generally translates to lower prices. Secondly, and perhaps more cautiously, the forecast also factors in a slowing growth in global consumption. While lower demand contributes to reduced prices, it also hints at broader economic trends.

Despite the expected dip in gasoline prices, the EIA's outlook for crude oil itself has seen a slight upward adjustment.

Brent crude, the international benchmark, is now projected to average $82.57 per barrel in 2023 and slightly higher at $82.88 per barrel in 2024. This is an increase from their previous forecast of $79.44 per barrel. Similarly, West Texas Intermediate (WTI), the U.S. benchmark, is forecast at $77.72 per barrel for 2023 and $78.88 per barrel for 2024.

On the demand front, the EIA expects global petroleum and liquid fuels consumption to grow by 1.1 million barrels per day (b/d) in 2024, a deceleration from the previously estimated 1.4 million b/d.

This tempered demand growth, combined with robust supply, underpins the lower price projections.

The U.S. is set to be a powerhouse in production, with domestic output of crude oil and other liquid fuels expected to climb by 980,000 b/d in 2023 and an additional 340,000 b/d in 2024. This surge will push U.S.

production to an all-time high of 13.3 million b/d next year, further contributing to global supply and downward pressure on prices.

Furthermore, the EIA anticipates that refining margins for both gasoline and diesel will soften in 2024 compared to the elevated levels seen in 2023. This reduction in the cost of converting crude oil into finished products like gasoline and diesel is another factor contributing to the overall decrease in pump prices.

For consumers, this confluence of increased supply, tempered demand growth, and lower refining costs paints a promising picture for fuel expenses in the coming year.