The share of disposable income U.S. drivers are paying for gasoline this year will likely fall to a 20-year low, the Energy Information Administration said Tuesday.
The forecast from the EIA, the independent statistical arm of the Energy Department, will be welcome news for the Trump administration beset by rising worries about the U.S. economy. Oil prices have fallen steadily since touching $80 a barrel at the beginning of the year, bringing consumers relief at the pump. The U.S. benchmark oil price was near $62 on Tuesday.
A gallon of regular gasoline will average $3.10 a gallon this year, down 20 cents from the year before, the EIA predicted. Prices are likely to extend that drop to reach to average $2.90 a gallon in 2026, the EIA added.
“Driven by falling gasoline prices, U.S. drivers’ gasoline expenditures as a share of disposable personal income are likely to be the lowest since at least 2005,” the EIA said in its report, noting that it was excluding the pandemic-affected year of 2020. “We estimate expenditures will average less than 2 percent of disposable income this year, down from an average of 2.4 percent over the previous decade.”
Prices have fallen as OPEC and its ally Russia have increased their own oil output. That surge in oil from OPEC+ has slowed the growth of U.S. oil production, which hit a record-high of 13.58 million barrels a day in June to surpass the previous peak set in October.
Prices for oil and gasoline could go even lower when China stops buying oil to fill its strategic petroleum reserves and offshore storage, said Rory Johnston, market analysis with Commodity Context.
“Crude prices will not truly begin to fall until both Chinese buying and builds of oil on water end,” Johnston wrote in a note. “But estimating the exact timing of already-shadowy Chinese policy pressure is, at best, a speculative venture.”
