EIA expects decreasing refining capacity to slow the decline of U.S. refining margins

The U.S. Energy Information Administration (EIA) expects U.S. refinery capacity to be 17.9 million barrels per day by the end of 2025, about 3% less than at the beginning of this year. In its November Short-Term Energy Outlook, EIA forecasts that after declining for several years, refinery margins (the difference between the selling price and the cost of production) for gasoline and diesel, known as crack spreads, will remain relatively unchanged in 2025.

“Crack spreads have been declining steadily since 2022, and we expect them to hold steady next year, even with the decrease in refining capacity,” said EIA Administrator Joe DeCarolis.

LyondellBasell Industries plans to close its Houston Refinery in the first quarter of 2025, removing nearly 264,000 barrels per day of domestic refining capacity. Last month, Phillips 66 announced it will cease operations at its Los Angeles refinery in the fourth quarter of 2025, removing a further 138,700 barrels per day of U.S. refining capacity.

“The good news from a consumer perspective is that lower crack spreads have resulted in reduced gasoline and diesel prices at the pump,” DeCarolis said.

EIA expects the U.S. gasoline price to average about $3.20 per gallon and diesel to average about $3.60 per gallon in 2025.

Other highlights from the November STEO include:

• Brent crude oil spot price: EIA expects the Brent crude oil spot price to average about $76 per barrel in 2025. EIA expects that global oil inventories to increase in the second quarter of 2025, following five quarters of decreases, as increased production from OPEC+ and other regions result in global oil production outpacing demand. Two primary sources of uncertainty in EIA’s forecast are the course of conflicts in the Middle East and the willingness of OPEC+ members to adhere to production cuts

• U.S. distillate fuels consumption: EIA forecasts U.S. consumption of distillate fuels will grow by about 4% in 2025, largely because of growth in domestic manufacturing activity and increased demand from truckers that ship goods.

• Global liquid fuels demand: EIA forecasts global liquid fuels consumption to have increased by about 1.0 million barrels per day by the end of this year and increase by 1.2 million barrels per day by the end of next year. Global liquid fuels consumption will likely average a record 104.4 million barrels per day for 2025, although the average consumption growth rate for each year is less than the average rate over the last ten years. Most liquid fuels consumption growth is in Asia—especially India. EIA expects India will increase its liquid fuels consumption by about 300,000 barrels per day in both 2024 and 2025, driven by rising demand for transportation fuels.

• Winter fuels: EIA updated its forecasts for average household heating fuel expenditures for this winter after a warmer-than-normal start to the season. EIA expects negligible changes from its previous forecast for the average household consumption and total expenditures for heating fuels this winter.