U.S. Gasoline Prices To Rise On Stronger Economy, Higher Demand

The U.S. national average gasoline prices are expected to rise to average $2.42 per gallon in 2021, from the lowest since 2016 of $2.17/gal in 2020, due to strengthening economy and higher demand for transportation fuels, the U.S. Energy Information Administration (EIA) said on Monday.

In 2022, the national motor gasoline average will be $2.43/gal, according to EIA’s latest estimates.

On-highway diesel prices are set to rise from $2.55/gal in 2020 to average $2.71/gal this year, and to $2.74/gal next year, the EIA said.

“As the vaccines for COVID-19 become more widely distributed in 2021, EIA expects the effects of the pandemic on liquids fuels consumption to moderate,” the administration said.

Still, the annual average gasoline consumption will still be lower than the pre-pandemic levels until 2022. Last year, U.S. motor gasoline consumption declined by an estimated 13 percent compared to 2019, according to EIA data.

Yet, the decline will be muted as a stronger economy and a rise in employment are set to raise light-duty vehicle miles traveled in both 2021 and 2022.

However, a trend unrelated to the pandemic—the improving fuel economy of the overall U.S. vehicle fleet—will continue to be a downward pressure on U.S. gasoline demand going forward, the EIA said.

For distillate fuel oil demand (much of which is consumed as diesel), EIA expects consumption in 2022 to be nearly equal to 2019 levels. Annual distillate fuel oil consumption dropped by an estimated 8 percent last year.

As of January 22, 2021, the national average for a gallon of regular gasoline stood at $2.39, according to AAA. The price was higher by $0.16/gal compared to a month ago, but $0.15 lower than a year ago. In the week to January 15, gasoline demand rose to 8.11 million bpd from 7.53 million bpd in the previous week, AAA said, citing EIA data.

By Charles Kennedy for Oilprice.com