Economy, weather, and CO₂

U.S. macroeconomics
The U.S. Bureau of Economic Analysis released the Advance Estimate of 2Q25 GDP on July 30, reporting annualized growth of 3.0%, 1.6 percentage points higher than our forecast assumed last month. As a result, our forecast now assumes GDP will grow by 1.7% in 2025 and 2.4% in 2026, an increase of 0.3 and 0.4 percentage points, respectively.

The macroeconomic assumptions in the STEO are based on S&P Global’s macroeconomic model. We incorporate STEO energy price forecasts into the model to obtain the final macroeconomic assumptions.

However, the macroeconomic forecast underlying the STEO was finalized prior to the release of both the Second Estimate of 2Q25 GDP, released August 28, and the Personal Income and Outlays Report for July 2025, released August 29. Both the revised 2Q25 GDP growth and July consumer spending growth exceeded our current forecast assumptions. GDP growth in 2Q25 is now estimated at an annual rate of 3.3% (compared with our 3.0% assumption), and consumer spending grew 0.3% in July (compared with our 0.2% assumption). Both series will be revised next month as the latest data are incorporated into S&P’s forecast.

According to the data we incorporated in our forecast, consumer spending has been relatively flat since the end of March after declining by 0.1% in February and then rebounding by 0.7% in March. Because consumer spending is an input into our gasoline forecast, slower consumer spending growth implies slower growth in gasoline consumption. Our forecast assumes that consumer spending growth will accelerate toward the end of 2025 and grow 1.7% in 2026.

Emissions
We forecast U.S. energy-related carbon dioxide (CO₂) emissions to increase by 1.5% in 2025, followed by a decrease of 0.5% in 2026. Coal, natural gas, and petroleum products all contribute to rising emissions in 2025, with the largest emissions increase observed from coal. Emissions decreases in 2026 are mostly from coal.

Coal-related CO₂ emissions tend to fluctuate more than CO₂ emissions from other fossil fuels both because of coal’s high carbon content, as well as coal’s substitutability with natural gas for generating electric power. Coal emits more CO₂ than almost all other fossil fuels, so small changes in coal use result in larger CO₂ emissions changes relative to other fossil fuels. Together with its primary role in electricity generation, where generation sources can vary significantly as a result of both economic and non-economic factors, coal emissions are often the most variable over our forecast.

Although coal is used in a variety of economic sectors in the United States, over 90% is used for electricity generation. As a result, forecasts of coal-related CO₂ emissions are largely influenced by changes to forecasts of coal-fired electricity generation. Coal-fired electricity generation and coal-related CO₂ emissions are expected to increase in the 2025 following expected increases in electricity demand, but they have generally been decreasing in recent years as a result diminishing coal-fired generation capacity as well as competition with other electricity generation sources.

Weather
As we approach the final weeks of summer, we expect cooler summer temperatures to extend into September. Based on our current forecasts and data from the National Oceanic and Atmospheric Administration, we expect the United States to average 193 cooling degree days (CDDs) in September, 8% fewer CDDs than both in September 2024 and compared with the 10-year monthly average. Supported by cooler weather this summer and expected in the fourth quarter of 2025, overall, our forecast assumes 2025 will be cooler than last year, with the United States averaging 7% fewer CDDs and 9% more heating degree days than in 2024, which had higher-than-average temperatures.