Petroleum products

U.S. crude oil production
Higher crude oil prices lead to more U.S. crude oil production in our forecast. We expect crude oil production in the United States will average 13.6 million barrels per day (b/d) in 2026 and 13.8 million b/d in 2027. Our 2027 forecast is an upward revision of about 0.5 million b/d (4%) from last month's Short-Term Energy Outlook (STEO). The West Texas Intermediate (WTI) crude oil price in our forecast is substantially higher than last month, averaging $74/b in 2026 and $61/b in 2027, compared with $53/b and $49/b, respectively, in the February STEO.

Because changes in oil prices take time to affect production—moving from investment decisions to rig deployment to well completion and first oil—the effect of higher prices in our forecast is more pronounced in 2027 than in 2026, with production increasing from 13.4 million b/d in September 2026 to 13.8 million b/d in 2027. The higher prices support increased drilling activity across most basins, and expanded pipeline capacity in the Permian region allows more associated natural gas to be brought to market, further supporting oil-directed operations. We increased our forecast for crude oil production in the Permian region by 6% in 2027 as new pipeline capacity and price incentives support growth.

We implemented a new modeling system for forecasting crude oil and natural gas production in the U.S. Lower 48 states this month. The new model modernizes our IT platform and enables more detailed, well-level decline curve analysis and calibration to recent historical production that will allow us to more flexibility in reacting to changes in oil markets. The new model also employs an improved methodology for benchmarking to survey data from EIA-914, Monthly Crude Oil and Lease Condensate, and Natural Gas Production Report, using well-level production information to better inform the forecast in states where well reporting data are still incomplete.

U.S. retail gasoline prices
The U.S. average retail gasoline price in our forecast averages $3.58 per gallon (gal) in March. Relative to last month’s STEO, higher crude oil prices contribute to gasoline prices that are 60 cents/gal higher in March and about 70 cents/gal higher in the second quarter of 2026. Prices decline in the third and fourth quarters, falling back close to $3.00/gal by the end of the year. Our annual average forecast for retail gasoline prices in 2026 is now $3.34/gal. In 2027, we expect annual average retail gasoline prices to fall below $3.20/gal. Our 2027 forecast is up 25 cents/gal compared with our February STEO.

Crude oil prices typically constitute around half the total retail price of gasoline. Other factors include, but are not limited to, refinery margins (subtracting crude oil cost from the refined product price) and retail margins (subtracting wholesale gasoline cost from the pump price). Although we expect most of the gasoline price increase to be passed through to the retail price in the coming weeks, we also expect that the normalization of refining and retail margins will occur more slowly. The net effect will be continued upward pressure in the second quarter that lags behind the initial increase.

Well above-average seasonal gasoline inventories reported in our Weekly Petroleum Status Report support our outlook for higher inventories of gasoline in 2026, which contributes to some downward pressure on refiner and retail margins.