Summer 2022 U.S. gasoline consumption expected to increase but remain below 2019 pre-pandemic levels

In our April 2022 Summer Fuels Outlook, we expect the ongoing effects of the COVID-19 pandemic to have less impact on the consumption of gasoline and diesel in the United States during the 2022 summer season (April through September) than the past two summers. We expect both prices and consumption of gasoline and diesel in the summer of 2022 to increase compared with last summer. Although we expect that ongoing effects of the COVID-19 pandemic will affect petroleum markets this summer less than the past two summers, high crude oil prices partly caused by geopolitical developments, particularly Russia’s further invasion of Ukraine, will contribute to higher fuel prices this summer.

We expect U.S. economic activity to increase through the summer, which will contribute to more crude oil consumption, which will further increase 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. Our price forecast is subject to a number of uncertainties, including:

• Recent geopolitical developments
• Responses to the ongoing pandemic
• The recently announced release of crude oil from strategic stocks
• The pace of economic growth

Crude oil prices, the primary driver of gasoline and diesel prices, have been highly volatile this year. Changes in crude oil markets could result in gasoline and diesel prices that are higher or lower than forecast, which, in turn, could affect consumption. We expect retail gasoline prices to average $3.84 per gallon (gal) this summer, compared with last summer’s average price of $3.06/gal (Figure 1). After adjusting for inflation, this summer’s forecast national average price would mark the highest retail gasoline prices since 2014. We expect forecasted prices to range from a high of $4.67/gal on the West Coast to a low of $3.48/gal on the Gulf Coast.

We forecast U.S. gasoline inventories to average 1% above the five-summer (2017–2021) average as refinery utilization increases in response to higher gasoline and distillate prices. We expect this increase to gradually add downward pressure to wholesale gasoline margins and retail prices throughout the summer. As a result, we forecast U.S. retail gasoline prices will gradually fall from an average of $4.22/gal in March 2022 to $3.75/gal in July and to $3.68/gal by September.

This year, the way that taxes will affect U.S. retail gasoline prices is more uncertain than usual. Some states, including Connecticut, Georgia, and Maryland, have passed temporary tax holidays that are likely to contribute to lower relative gasoline prices until the holidays expire. In the April Short-Term Energy Outlook (STEO), which was finalized on April 7, we did not incorporate the additional gasoline and diesel fuel tax suspension from June 2022 through December 2022 that New York passed on April 9. The potential for those tax holidays to be extended and for more states to announce similar measures are another source of uncertainty for gasoline prices this summer.

We forecast that the U.S retail diesel fuel price will average $4.57/gal this summer, up $1.28/gal from an average of $3.28/gal last summer and up $1.65/gal from the recent five-summer average of $2.92/gal, marking the highest summer average diesel price since 2014 in real terms.

As the effects of the COVID-19 pandemic on gasoline consumption decline and U.S. employment continues to rise, we expect gasoline consumption to average 9.2 million barrels per day (b/d), up 0.8% from last summer but down from 9.5 million b/d in 2019. We forecast that monthly U.S. gasoline consumption in 2022 will peak in July at 9.4 million b/d (Figure 2).

Based on Standard and Poor’s (S&P) Global macroeconomic model, we forecast a U.S. GDP growth rate of 3.4% in 2022, reflecting rising levels of employment and consumer expenditures that typically point to rising consumption of gasoline and diesel. However, we also expect the highest real (inflation-adjusted) retail gasoline prices since 2014, which could limit driving this summer.

We expect U.S. consumption of distillate fuel oil (which includes diesel and heating oil) to surpass last summer’s level by 2% and be nearly equal to consumption in the summer of 2019. Diesel consumption, a barometer of economic activity because of its use in the trucking and industrial sectors, is expected to increase in the summer of 2022. Demand for diesel fuel has remained relatively high since 2020 compared with demand for gasoline, which was more affected by the pandemic. In the first quarter of 2022 (1Q22), we estimate that diesel demand averaged 3.6 million b/d, up from 3.5 million b/d last year. In the 2022 summer driving season, we forecast that diesel consumption will average 3.9 million b/d, up nearly 90,000 b/d from 2021.

Recent increases in the volatility of crude oil prices indicate 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.

In addition, since mid-2020, global petroleum consumption has increased faster than petroleum production, contributing to declining oil stocks and a steady increase in the price of crude oil and retail petroleum products. The actual retail price that U.S. consumers pay for gasoline and diesel this summer will depend on the course of global oil supply and demand in the coming months, which is very uncertain. The effect of recent announcements from the U.S. government and other International Energy Agency (IEA) member countries that they will release a combined 240 million barrels of crude oil from strategic stocks over the course of six months presents further uncertainty for markets and prices this summer.

Global crude oil demand could also vary from our forecast levels. We expect demand to rise by 1.8 million b/d in 3Q22 compared with 3Q21, but many factors, including potential new outbreaks of COVID-19, could drive this number higher or lower, which would affect crude oil prices. In addition, inflation and the conflict in Ukraine could affect economic growth, which would affect crude oil demand and price outcomes.

The Summer Fuels Outlook provides more detail on the gasoline and diesel fuel summer forecasts.

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.