EIA raises its 2027 gasoline and diesel forecasts but expects cheaper natural gas this winter

The U.S. Energy Information Administration still expects fuel prices to come down next year, but by less than it thought a month ago. In its Short-Term Energy Outlook released on November 10, the agency forecast that regular gasoline will average $3.73 a gallon in 2027 and on-highway diesel $5.03. Those figures are about 5% and 12% higher than in its October outlook. Both prices include taxes and are not adjusted for inflation.

EIA's explanation is that it now assumes global markets for refined fuels will face supply constraints through the end of 2027. Damage to refineries in the Middle East and Russia has reduced the amount of gasoline, diesel and other products available for export, the agency says. That has kept refiners' margins high, and EIA expects them to stay elevated through most of next year.

Oil prices and the Middle East

Crude oil prices have also been high. The Brent benchmark averaged $124 a barrel in October, $10 more than in September and the highest since July 2022, according to the full report. EIA links the rise to falling global inventories and to attacks on oil tankers around the Middle East and, more recently, in the Black Sea. Brent dropped below $100 on November 4, and the agency expects it to average around $100 in November and December.

EIA estimates that oil production shut in across the Middle East averaged 2.5 million barrels a day in October, down from 10.9 million at the peak in May. It assumes that most of the region's output outside Iran returns to pre-conflict levels by the end of the second quarter of 2027, and it forecasts that Brent will fall gradually to an average of $77 in the last quarter of next year. The agency cautions that oil flows from the region "will remain susceptible to disruption," so short-term prices could swing more than its monthly forecast shows.

What the forecast means for household energy bills

For homes heated with natural gas, the outlook improved. A warm start to November reduced heating demand, and EIA now expects 3,840 billion cubic feet of gas in storage at the end of the month, 67 billion more than it forecast in October. It puts the Henry Hub spot price at $2.87 per million British thermal units on average from November through March, 16% below last month's forecast and 36% below last winter. In the agency's price table, the residential gas price averages $13.31 per thousand cubic feet in the first quarter of 2027, compared with $14.77 a year earlier, a drop of about 10% by our calculation.

That forecast assumes a mild winter, with 4% fewer heating degree days than the 10-year average. EIA notes that the National Oceanic and Atmospheric Administration's winter outlook favors above-average temperatures across the northern United States from December through February. It also cautions that severe cold, "particularly in January and February," could push demand above its forecast and cause temporary price spikes.

Heating oil remains far more expensive than a year ago. EIA's weekly heating oil and propane survey put the U.S. average residential heating oil price at $6.138 a gallon, excluding taxes, in the week of November 2. That was 9.2 cents lower than a week earlier but $2.506 higher than a year before. Residential propane averaged $2.820 a gallon, up 37.5 cents on the year. The survey runs only during the heating season, from October through March.

Electricity prices keep rising, though more slowly. EIA expects the average residential price to reach 18.17 cents per kilowatthour in 2026, up 5.4% from 2025, and 18.68 cents in 2027, up 2.8%. It estimates that U.S. power plants will generate a record of almost 4,390 billion kilowatthours this year, 2.7% more than in 2025, driven by growing commercial demand and a hot summer.

What comes next

EIA finalized the inputs for this forecast on November 5 and says it does not account for market events after that day. Its next outlook is scheduled for December 8, 2026. For October's consumer prices, including gasoline, see our report on the Consumer Price Index.