After hitting a four-year low in 2020, the Energy Information Administration predicts that retail prices for diesel and gasoline will increase in 2021 and 2022 as the U.S. economy recovers from the COVID-19 pandemic – fueling increased transportation demand.
[Above photo by Errant Knight.]
The EIA said national average motor gasoline and diesel prices in 2020 dipped to their lowest level since 2016: $2.17 per gallon for gasoline and $2.55 per gallon for diesel, according to the agency’s Gasoline and Diesel Fuel Update.
Consequently, EIA is predicting in its latest Short-Term Energy Outlook that the ongoing U.S. economic recovery from COVID-19 related lockdown and stay-at-home orders will generate greater demand for transportation fuels and thus lead to higher prices for gasoline and diesel in 2021 and 2022.
EIA expects regular gasoline retail prices to average $2.42 per gallon in 2021 and $2.43 per gallon in 2022, while on-highway diesel prices should average $2.71 per gallon in 2021 and $2.74 gallon in 2022.
“Demand for transportation fuels fell in 2020 primarily because of responses to the COVID-19 pandemic,” the EIA emphasized in a research brief. However, EIA expects annual average motor gasoline consumption – which fell by an estimated 13 percent in 2020 – to remain lower than 2019 levels through 2022.
EIA forecasts light-duty vehicle miles traveled will increase as both economic activity and employment increase in 2021 and 2022. Meanwhile, where distillate fuel oil demand in concerned – much of which is consumed as diesel – EIA expects 2022 consumption to be nearly equal to 2019 levels. Annual distillate fuel oil consumption fell by an estimated 8 percent in 2020, the agency added
EIA forecasts that crude oil prices will remain lower than 2019 levels through 2022, contributing to lower retail fuel prices compared with the 2019 average. Because a barrel contains 42 gallons, each dollar-per-barrel change in the price of Brent crude oil tends to result in a 2.4-cents-per-gallon change in the price of petroleum fuels, with all else remaining equal.