Will Gasoline and Diesel Prices Drop in 2024 and 2025?

For months, Americans have struggled with high fuel costs. While inflation has slowed, its effects are still visible, especially in the fuel sector. Gasoline and diesel prices remain elevated, impacting everyday expenses. Diesel, in particular, plays a crucial role in the economy, as it fuels the trucks that transport goods nationwide. When diesel prices rise, so do costs for food, fuel, and other essentials. But will fuel prices finally come down?

More Refinery Capacity Means Lower Prices

The U.S. Energy Information Administration (EIA) predicts lower gasoline and diesel prices in 2024 and 2025. This decline is primarily due to increased refinery capacity, which boosts fuel supply and reduces price pressure. In 2023, U.S. refinery capacity grew from 18.06 million barrels per day (b/d) in January to 18.31 million b/d by December. This expansion should help stabilize fuel prices.

Additionally, new international refineries, especially in the Middle East, are adding to the global fuel supply. Increased production in countries like Kuwait is easing worldwide fuel costs. As a result, gasoline and diesel prices in the U.S. are expected to drop over the next two years.

Gasoline Demand Expected to Decline

Despite a growing economy, gasoline consumption in the U.S. is projected to remain steady in 2024 and decrease slightly in 2025. Historically, gasoline use has only fallen during economic downturns. However, fuel efficiency improvements and changing transportation trends are driving this rare shift. Less demand, combined with greater supply, should push gasoline prices lower.

Diesel Prices Will Ease, But Demand Will Rise

Diesel prices are also expected to decrease, thanks to higher production and improved supply chains. However, U.S. diesel consumption is forecasted to grow by 1.3% (about 50,000 b/d) in 2024 due to continued economic expansion. Despite this increase in demand, the rise in supply should help keep prices lower than in 2023.

What Could Affect Fuel Prices?

While fuel prices are expected to drop, several factors could influence costs. Unplanned refinery shutdowns, supply chain disruptions, or international trade issues could drive prices back up. Additionally, regulatory changes, such as increased fuel taxes in some states, could affect consumer costs.

By early 2025, the closure of LyondellBasell’s Houston refinery in Texas and the transition of Phillips 66’s Rodeo refinery in California to renewable diesel production may also impact supply and prices.

Conclusion: A Promising Outlook for Consumers