In EIA’s April Short-Term Energy Outlook (STEO), we expect the ongoing effects of the COVID-19 pandemic to significantly affect petroleum markets in the summer of 2021. However, markets will be less affected than they were last summer, and we expect COVID-19 impacts will diminish through 2021 as an increasing portion of the population is vaccinated against COVID-19. In the April STEO, vaccinations and fiscal stimulus support continuing economic recovery, which drives petroleum demand growth. We expect prices and consumption of gasoline and distillate fuel to be up from last summer (Figure 1). We consider the summer season for gasoline and diesel fuel to run from April through September.
We forecast significantly more global economic activity this summer compared with last summer, contributing to higher crude oil prices, which are the largest determining factor in U.S. gasoline prices. We expect that growth in refinery output and rising crude oil supply from OPEC+ and U.S. tight oil producers will put downward pressure on retail gasoline prices, despite an expected rise in gasoline demand. We expect the price of Brent crude oil will fall from an average of $65 per barrel (b) in April to $61/b in September, averaging $64/b this summer, $28/b higher than last summer.
Current gasoline price levels reflect near-term strength in crude oil prices and low U.S. gasoline inventory levels, partly resulting from reduced gasoline supply following significant refinery disruptions along the U.S. Gulf Coast in February and early March. According to our weekly Gasoline and Diesel Fuel Update, the U.S. regular-grade gasoline price on March 29 (the week before the start of EIA’s summer driving season) was $2.85 per gallon (gal), which was 85 cents/gal higher than at the same time last year.
As the effects of COVID-19 subside, we forecast demand will increase, contributing to higher gasoline prices than last summer. We forecast the retail price of regular-grade gasoline in the United States will average $2.78/gal during summer 2021, 72 cents/gal more than last summer’s average of $2.06/gal. Based on IHS Markit’s macroeconomic forecast, we forecast a U.S. GDP growth rate of 5.6% in 2021 that reflects rising levels of employment, disposable income, and consumer expenditures, all of which typically point to rising consumption of gasoline and diesel. However, behavioral patterns—notably those related to working from home and commuting—remain highly uncertain and will significantly affect petroleum consumption even as vaccines are increasingly administered. Employment’s effect on gasoline consumption this summer may be limited as increased participation in work-from-home programs (compared with pre-COVID levels) is likely to continue even though many workplaces are re-opening. In addition, some behavioral changes could persist, which could further limit increases in gasoline consumption.
We estimate that gasoline consumption increased through the first quarter of 2021, growing from 7.7 million barrels per day (b/d) in January to an estimated 8.6 million b/d in March (based on the Weekly Petroleum Status Report data and forecasts), an increase of 890,000 b/d. For comparison, consumption in 2019 during the same period increased 410,000 b/d. The stronger growth during this period in 2021 likely reflects not only seasonal growth but also growth related to the diminishing impacts of the COVID-19 pandemic on gasoline consumption (Figure 2).
We forecast that gasoline consumption in 2021 will peak in August at 9.1 million b/d, which is up from 8.5 million b/d in August 2020 but down from the 9.8 million b/d in August 2019. We forecast that 2021 summertime gasoline consumption will average 8.8 million b/d, a 1.0 million b/d (13%) increase from 2020 but a 0.7 million b/d (7%) decrease from summer 2019 consumption.
The response to the COVID-19 pandemic has not affected U.S. diesel fuel demand as much as it has affected gasoline demand. Compared with 2019, diesel fuel and gasoline consumption in 2020 fell by 8% and 14%, respectively. Diesel consumption continued to remain relatively strong in the first quarter of 2021. We estimate that first quarter 2021 diesel consumption was 6% lower than during the first quarter of 2019 and 2% more than the first quarter of 2020.
Diesel’s use in trucking and industry makes it a barometer of economic growth. We expect our forecast GDP growth rate will support trucking and shipping activity, which will contribute to an increase in diesel consumption.
We forecast that consumption of distillate fuel, which includes diesel fuel and heating oil, will average 4.0 million b/d this summer, an 11% increase (400,000 b/d) from last summer’s consumption, which was the lowest summer distillate consumption since 2009 (Figure 3). However, we expect distillate consumption to be nearly equal to 2019 levels (down less than 1%). In summer 2022, we forecast that distillate consumption will average 4.1 million b/d, the highest level since at least 2007.
We forecast diesel fuel retail prices will average $2.96/gal this summer, which is up from an average of $2.43/gal last summer. However, this forecast is subject to many of the same uncertainties as the gasoline price forecast, particularly related to crude oil prices, which are the main drivers of overall diesel fuel price levels.
In the April STEO release, the Summer Fuels Outlook provides more detail on the gasoline and diesel fuel summer forecasts.
U.S. average regular gasoline price increases, diesel price decreases
The U.S. average regular gasoline retail price increased nearly 1 cent to $2.86 per gallon on April 5, 93 cents higher than the same time last year. The Midwest price increased nearly 4 cents to $2.78 per gallon, and the West Coast price increased more than 1 cent to $3.49 per gallon. The Rocky Mountain price was unchanged at $2.95 per gallon. The East Coast price decreased more than 1 cent to $2.77 per gallon, and the Gulf Coast price decreased nearly 2 cents to $2.59 per gallon.
The U.S. average diesel fuel price decreased nearly 2 cents to $3.14 per gallon on April 5, 60 cents higher than a year ago. The Gulf Coast and Midwest prices each decreased more than 2 cents to $2.93 per gallon and $3.08 per gallon, respectively, the East Coast and Rocky Mountains prices each decreased nearly 2 cents to $3.11 per gallon and $3.28 per gallon, respectively, and the West Coast price decreased nearly 1 cent to $3.65 per gallon.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 0.3 million barrels last week to 39.6 million barrels as of April 2, 2021, 8.8 million barrels (18.2%) less than the five-year (2016-2020) average inventory levels for this same time of year. Gulf Coast and East Coast inventories increased by 0.7 million barrels and 0.2 million barrels, respectively. Midwest and Rocky Mountain inventories decreased by 0.3 million barrels and 0.2 million barrels, respectively.
|Retail prices||Change from last|
|Click to chart this seriesGasoline||2.857||0.005up-arrow||0.933up-arrow|
|Click to chart this seriesDiesel||3.144||-0.017down-arrow||0.596up-arrow|
|Futures prices||Change from last|
|Click to chart this seriesCrude oil||61.45||0.48up-arrow||33.11up-arrow|
|Click to chart this seriesGasoline||2.022||0.055up-arrow||1.330up-arrow|
|Click to chart this seriesHeating oil||1.832||0.022up-arrow||0.761up-arrow|
|*Note: Crude oil price in dollars per barrel.
Markets were closed on 4/2/2021.
|Stocks||Change from last|
|Click to chart this seriesCrude oil||498.3||-3.5down-arrow||13.9up-arrow|
|Click to chart this seriesGasoline||234.6||4.0up-arrow||-22.7down-arrow|
|Click to chart this seriesDistillate||145.5||1.5up-arrow||22.8up-arrow|
|Click to chart this seriesPropane||39.572||0.325up-arrow||-19.455down-arrow|