Average retail gasoline prices in the United States will fall to about $3.60 per gallon in the second half of 2026, down sharply from $4.48 per gallon in May, according to the July Short-Term Energy Outlook published by the U.S. Energy Information Administration on July 7, 2026. The forecast reflects increased shipping traffic through the Strait of Hormuz following a June 18 memorandum of understanding between the United States and Iran to end a months-long conflict and reopen the strait. The agency now expects worldwide crude oil production and trade flows to rebound to near pre-conflict levels by year's end, with most previously shut in production returning online by the first quarter of 2027.
The Brent crude oil spot price averaged $85 per barrel in June, down $22 per barrel from May and $32 per barrel from the April 2026 peak. EIA forecasts Brent crude oil prices to average $74 per barrel in the third quarter of 2026, $27 per barrel lower than last month's forecast. By 2027, Brent prices are expected to fall to an average of $65 per barrel as continued oil inventory builds push prices lower. For U.S. consumers, gasoline prices will decline to $3.80 per gallon in the third quarter of 2026 from $4.21 per gallon in the second quarter, then drop further to about $3.40 per gallon in the fourth quarter. The annual average will fall below $3.10 per gallon in 2027. The outlook also forecasts U.S. crude oil production will rise from 13.6 million barrels per day in 2025 to 13.8 million barrels per day in 2026 and 14.0 million barrels per day in 2027.
The report finds that rising global oil supply and slowing inventory withdrawals have pushed oil prices lower. According to the agency, lower crude oil prices will contribute to the drop in U.S. retail gasoline prices. Although tight gasoline inventories keep refiners' margins elevated in the near term, rebuilding stocks and the end of the summer demand season are expected to narrow those margins and push prices even lower. The report also projects that record U.S. natural gas production will help meet rising demand and push prices lower, with Henry Hub spot prices averaging close to $3.70 per million British thermal units in 2026 before easing below $3.50 per million British thermal units in 2027.
The reopening of the Strait of Hormuz marks a turning point for global energy markets after months of disruption that sent prices soaring. The June 18 diplomatic agreement allowed previously shut in oil production to begin returning, with most expected back online by early 2027. This means more supply flooding the market just as inventory levels start to rebuild, creating downward pressure on prices throughout the supply chain. For American drivers who saw gas prices peak above $4.48 per gallon in May, the relief will be substantial—a drop of nearly $1.50 per gallon by year's end represents real savings at the pump. The report's price projections suggest the volatility driven by the Strait of Hormuz conflict will fade as trade routes normalize and the global oil market rebalances. Natural gas markets will follow a similar trajectory, with record domestic production keeping prices moderate despite rising demand.
The outlook points to a 2027 where energy prices settle back to more stable levels. Brent crude averaging $65 per barrel and retail gasoline below $3.10 per gallon would return prices to territory last seen before the conflict. For consumers and businesses planning ahead, the message is clear: the price shock is temporary, and relief is already underway.