We forecast retail gasoline and diesel prices will decline in 2023 and 2024, according to our latest Short-Term Energy Outlook (STEO), after reaching multiyear highs in the first half of 2022. We forecast that retail prices for regular-grade gasoline will average $3.32 per gallon (gal) in 2023 and continue to decrease to average $3.09/gal in 2024, down from $3.96/gal in 2022. We expect on-highway diesel prices to decrease to average $4.23/gal in 2023 before decreasing further to $3.70/gal in 2024. These forecast price decreases are based on our expectation of lower demand growth for diesel and motor gasoline with continued high production of those products.
In 2023, we expect that limited growth in global demand for gasoline combined with increased gasoline production will cause gasoline inventories to rise in the United States. We estimate that annual average U.S. gasoline consumption increased by 0.3 million barrels per day (b/d) in 2022. We forecast a decrease in gasoline consumption in 2023 of 0.3 million b/d compared with 2022, and we expect gasoline consumption will remain similar to 2023 in 2024. Additional refinery capacity that came online in late 2022, combined with additional capacity expansions expected to come online in 2023, will also contribute to rising supplies of both gasoline and diesel fuel internationally, further contributing to lower prices globally in 2023 and 2024. We also estimate that U.S. refiners will continue to produce gasoline, even as prices decrease, to meet higher global demand for diesel fuel.
We expect annual U.S. consumption of gasoline will remain less than in 2019 (9.3 million b/d) through the end of 2024. However, we estimate that people drove more in the United States during 2022 than during 2019, before the pandemic. We forecast this trend of increased travel will continue in the United States during 2023 and 2024, but increased vehicle fleet fuel economy will offset the increase in fleet vehicle miles traveled. Vehicle fleet fuel economy is the number of fleet vehicle miles traveled, including hybrid or hybrid-electric vehicles, divided by all gasoline consumption, also reported in miles per gallon.
Source: EIA