Economy, weather, and CO₂

U.S. macroeconomics
Our forecast assumes that real GDP will grow by 2.0% in 2025, similar to our forecast last month, and growth will remain at that rate in 2026. On a year-over-year basis, we assume consumer price index (CPI) inflation will rise by 2.5% in 2025 and by 2.8% in 2026. Rising CPI inflation is accompanied by tighter monetary policy and higher interest rates compared with our forecast last month. Our forecast assumes the unemployment rate rises from 4.2% in the fourth quarter of 2024 (4Q24) to 4.4% in 2Q25 where it remains through 4Q26. On Friday, January 10, the Bureau of Labor Statistics reported that unemployment fell to 4.1% in December.

Although we assume the U.S. population will increase in 2025 and 2026, the growth rate is slower relative to last month’s forecast. We now assume that the population will grow 0.5% in 2025 and 0.8% in 2026. By the end of 2025, our forecast now assumes that the total U.S. population will reach 344.4 million people. Last month’s forecast assumed the U.S. population would reach 345.6 million people by the end of 2025 We assume the population will continue to grow through 2026 and reach 345.8 million people by 4Q26.

All else equal, total energy demand increases as the population increases, so a change to the forecast of the total population has a direct effect on our energy market forecasts.

The macroeconomic forecasts in the STEO are based on S&P Global’s macroeconomic model. We incorporate STEO energy price forecasts into the model to obtain the final macroeconomic assumptions.

Emissions
We forecast U.S. energy-related carbon dioxide (CO₂) emissions to increase slightly in 2025 and to decrease slightly in 2026.

Emissions growth in 2025 is a result of our expectation of increased consumption of petroleum products. Growth in petroleum emissions occurs across multiple sectors, with most growth associated with more consumption of distillate fuel oil and jet fuel. CO₂ emissions from natural gas and coal remain relatively unchanged overall.

These trends reverse in 2026, with slightly lower emissions from petroleum and natural gas relative to 2025. CO₂ emissions from petroleum products decline slightly as improvements in vehicle fuel economy reduce consumption of motor gasoline. Natural gas emissions continue to remain flat as both natural gas-fired generation and natural gas use in residential and commercial buildings remains mostly unchanged from 2025.

Although we currently expect only modest changes to emissions over the next two years, these estimates are not certain. Energy-related CO₂ emissions depend primarily on how much fossil fuel is consumed, the forecasts for which can change considerably over time. Some of the most notable factors that can influence energy consumption and energy-related emissions include energy prices, weather, and macroeconomic conditions. As these outlooks change, our emissions outlook typically does as well.

Weather
The United States experienced a cool December, averaging about 720 heating degree days (HDDs), 16% more than December 2023 and 2% more than the 10-year December average. Based on our current forecasts and data from the National Oceanic and Atmospheric Administration, we expect the cooler weather to continue through the rest of the 2024–2025 winter heating season ending in March. We forecast that the United States will average around 2,000 HDDs in 1Q25, 5% more HDDs than 1Q24, resulting in 8% more U.S. HDDs in 2025 than in 2024.