U.S. Fuel Prices Change Forecast 2026: Impact on Gas Stations’ Margins and Profitability
- MMCG
- 5 days ago
- 14 min read
Introduction
Retail fuel prices in the United States have seesawed in recent years – surging to multiyear highs in 2022 and then easing through 2023–2024.[1] Looking ahead to 2026, the outlook points to a continued moderate decline in U.S. fuel prices overall, driven largely by cheaper crude oil and improving vehicle fuel efficiency.[1] However, this national trend masks important regional differences and business implications. In particular, California’s fuel market faces unique challenges as a major refinery closure looms, which is expected to keep West Coast gasoline prices elevated even as the rest of the country sees relief.[3] This article provides a comprehensive forecast of U.S. fuel price changes in 2026 and analyzes the impact on gas stations, including their profit margins and overall profitability.
U.S. Fuel Price Forecast for 2026
According to the U.S. Energy Information Administration’s latest Short-Term Energy Outlook (STEO), Americans can expect slightly lower gasoline and diesel prices in 2026 compared to recent years.[1] Table 1 below summarizes key forecasts for average prices in 2023 through 2026:
Metric | 2023 | 2024 | 2025 (proj.) | 2026 (proj.) |
WTI Crude Oil Price (US$/bbl) | $78 | $77 | $65 | $51 |
Retail Gasoline Price (US$/gal) | $3.50 | $3.30 | $3.10 | ~$3.00 |
Retail Diesel Price (US$/gal) | $4.20 | $3.80 | $3.70 | ~$3.50 |
Source: U.S. EIA Short-Term Energy Outlook (Nov 2025).[1][2]
As shown above, the national average regular gasoline price is projected to fall from about $3.30/gal in 2024 to just under $3.00 per gallon in 2026, marking the lowest annual average since 2020.[1] This 2026 gasoline price would be roughly 4% lower than 2025’s level and about 10% below 2024.[1] For diesel fuel, a similar downtrend is expected: the average diesel price is forecast around $3.50/gal in 2026, down from ~$3.70 in 2025 and roughly 7% lower than 2024’s average.[2] In short, fuel prices in 2026 are anticipated to ease modestly nationwide, providing some relief to drivers and businesses after the volatility of the past few years.
What is driving these price forecasts? The primary factor is the expected decline in global crude oil prices. Crude oil is the single largest component of gasoline and diesel cost, typically accounting for about half of the pump price.[1] In 2024, Brent crude oil averaged around $81 per barrel; by 2026 EIA projects Brent will fall to about $55/bbl (with West Texas Intermediate crude around $51/bbl, as in Table 1).[1][2] This substantial drop in oil prices directly translates to lower fuel production costs and thus lower retail prices. In fact, lower crude oil prices are the main reason gasoline and diesel are forecast to become cheaper in 2025–2026.[1][2]
Beyond crude prices, consumer demand trends also play a role. U.S. gasoline consumption is expected to remain relatively flat or even decrease slightly by 2026 despite the price drop.[1] This is largely due to ongoing improvements in vehicle fuel economy and growth in electric vehicles, which together raise fleet-wide efficiency and dampen gasoline demand.[1] Essentially, more miles can be driven on less fuel as newer cars are more efficient and EVs displace some gasoline usage. This softening of demand growth puts additional downward pressure on fuel prices, as there is less consumption than there would be otherwise.
At the same time, a counteracting factor is emerging on the supply side: changes in U.S. refining capacity and margins.Several refinery closures and conversions are occurring over 2024–2026, which constrain domestic fuel supply growth and lead to higher refining margins per gallon.[2][3] When crude oil costs fall, normally consumers would see nearly proportional drops at the pump; but if refinery “crack spreads” (the difference between wholesale fuel prices and crude prices) widen, they absorb some of the benefit, resulting in a smaller retail price decline.[2] EIA notes that in 2025 and 2026, falling crude costs will be partly offset by rising crack spreads (refiners’ profit margins), thereby dampening the drop in prices for consumers.[2] In fact, forecasts show refinery margins increasing significantly over this period – for example, the average diesel crack spread is expected to jump from about $0.52/gal in 2024 to $0.84/gal in 2026.[2] Gasoline refining margins are also projected to strengthen in 2025–26.[2] These higher margins reflect tighter fuel supply (due in part to refinery shutdowns) and mean that refiners will capture a larger slice of each gallon’s price, even as overall prices inch down.
To summarize the key drivers behind the 2026 fuel price outlook:
Lower crude oil prices: Crude oil (which makes up ~50% of fuel cost) is forecast to drop sharply by 2026, pushing gasoline and diesel prices down. Brent crude is expected to average only ~$55 in 2026, versus $81 in 2024.[1][2]
Improved fuel efficiency: Gasoline demand is flattening or falling slightly as vehicles become more efficient and EV adoption rises, reducing consumption despite lower prices.[1] This weaker demand growth contributes to softer prices.
Refining capacity reductions: The U.S. is losing some refining capacity (e.g. through plant closures), which leads to tighter gasoline and diesel supply than otherwise.[2][3] Less supply cushions the price decline.
Higher refining margins: With fewer refineries and steady demand, refiners can charge higher margins per gallon (wider crack spreads). These rising margins partly offset the benefit of cheap crude, so pump prices don’t fall as steeply.[2] Essentially, consumers will see only a portion of the potential price drop, as refiners retain more profit per gallon.
Figure: Composition of U.S. retail gasoline price by component (illustrative). When oil prices fall, the crude oil portion of the pump price shrinks, but other components like refining margin can grow. EIA forecasts that crude oil will account for only ~44% of the gasoline price in 2026 (down from 53% in 2025), while refinery crack spreads and other costs will make up a larger share.[1][2] This shift means consumers won’t see a one-for-one drop in retail prices with crude – a larger piece of the pie is taken up by refining, distribution, and taxes.
The net effect of these forces is a gradual, modest decline in average U.S. fuel prices over the next couple of years. By 2026, gasoline nationwide could average roughly the “$3-gallon” level, and diesel around $3.50, barring any major shocks.[1][2] These prices would be significantly lower than the 2022 peak (when regular gasoline hit about $4.50 nationally) but still slightly above pre-2022 norms.[1] It’s a welcome trend for consumers and businesses sensitive to fuel costs. However, not every region of the country will benefit equally – and California drivers in particular may actually face higher prices.
Regional Outlook: California and West Coast Fuel Challenges
Fuel prices in the U.S. vary by region, and that divergence is set to widen further in 2026. The West Coast (especially California) almost always endures the highest gasoline prices in the nation, due to a combination of factors: stringent fuel specifications, higher taxes, and a relative isolation in supply (limited pipeline connections mean the West Coast must largely supply itself or import by sea).[3][4] In 2024, for instance, California’s region averaged about $4.18/gal for regular gasoline – more than a $1.00 above the Gulf Coast’s average of $2.89/gal.[3] This gap is poised to grow as unique supply constraints hit the West Coast in 2025–2026.
Figure: U.S. annual average retail gasoline price by region, historical and projected. The West Coast consistently has the highest prices in the country, well above the U.S. average. By 2026, while other regions are forecast to see slight price declines, the West Coast is expected to experience increasing gasoline prices due to local supply issues.[3]
EIA forecasts that all U.S. regions except the West Coast will enjoy sub-$3 gasoline in 2026, as their prices drift downward.[1][3] In contrast, West Coast gasoline is projected to average about $4.10 per gallon in 2026.[3] In fact, EIA expects that in 2026 California and the West Coast will see prices rise slightly, even as the rest of the country sees prices fall.[3] The primary reason is a significant loss of refining capacity in California. Two major oil refineries in the state are slated to shut down operations, which will tighten the fuel supply and put upward pressure on local prices.[3][4]
Refinery closures in California. At the end of 2025, Phillips 66 is permanently closing its Wilmington refinery in the Los Angeles area (139,000 barrels per day capacity).[4] And by April 2026, Valero plans to shut down its Benicia refinery in the San Francisco Bay Area (170,000 b/d) amid a difficult regulatory and market environment.[4] Combined, these facilities represent roughly 8–10% of California’s refining capacity each. Losing both within months will significantly reduce in-state gasoline production.[4] The West Coast’s total gasoline output could drop by around 9% due to the Benicia shutdown alone, according to industry analysis.[4]
These closures reflect broader trends – oil companies are retrenching from the California market, which they view as increasingly challenging due to environmental regulations and declining local fuel demand.[3][4] For example, Phillips 66 had already converted its Rodeo refinery (Bay Area) to renewable diesel, and with the Wilmington shutdown, the company will no longer refine crude oil anywhere in California.[4] While cleaner energy is a positive development, the immediate impact is a more constrained gasoline supply for California, which in turn has to be filled by drawing fuel from elsewhere.[3][4]
California will need to compensate by boosting fuel imports from other regions or overseas. However, importing gasoline to California is neither quick nor cheap. The state’s unique CARBOB gasoline formulation limits the number of refineries worldwide that can supply compliant fuel.[4] Any imports must travel long distances by ship (given the lack of pipelines into California) and arrive in time to meet demand peaks.[3][4] This dependency on imports means California’s market is shifting from a position of “export parity” (relying on local surplus) to “import parity,” where prices are set by the higher cost of bringing in fuel from global markets.[4] In practical terms, that raises the baseline price. Analysts warn that the West Coast will see upward pressure on retail gasoline prices and greater volatility as it becomes more reliant on imported supply.[4]
EIA’s forecast captures this dynamic: despite national fuel prices trending down, Western states may pay more at the pump in 2026. The agency explicitly notes that West Coast gasoline prices are expected to increase due to the refining capacity drop, even as East Coast, Gulf Coast, Midwest, and Rocky Mountain prices edge lower.[3] In numbers, while the U.S. average gasoline price falls to ~$3, California’s average might remain in the $4+ range.[3] This divergence underscores how regional infrastructure and policy factors can override broader trends.
It’s worth noting that California policymakers are taking steps to mitigate extreme fuel price spikes. A new state law empowers regulators to require minimum gasoline inventories and penalize excessive refinery margins, aiming to smooth out supply shocks.[3][4] These measures were prompted by past episodes where California gas prices spiked due to outages and low inventories.[3] While maintaining higher inventories may reduce volatility, it does not fully offset the structural impact of losing local refineries. In the near term, Californians should be prepared for persistently higher fuel costs relative to the rest of the country. Gas stations on the West Coast will likely pay more to procure fuel, and many may pass on those costs to consumers, constrained by the competitive and regulatory environment.
In summary, 2026 will be a tale of two fuel markets: most of the U.S. seeing gently lower prices thanks to cheap crude and ample supply, versus California grappling with supply constraints that keep prices elevated. This stark regional contrast has important implications for fuel retailers operating in these different markets.
Impact on Gas Stations: Margins and Profitability
What do these price forecasts mean for gas station owners and operators? On the surface, lower fuel prices might suggest leaner revenue, since each gallon sold brings in fewer dollars. However, the profitability of gas stations depends on the margin per gallon and sales volume, rather than the retail price alone. In fact, it’s a common misconception that gas stations thrive when prices rise. In reality, fuel retailing is a high-volume, low-margin business. The average gross markup on a gallon of gasoline is only on the order of 35–40 cents, and after operating expenses, net profit is around 10–15 cents per gallon in many cases.[5] That holds true whether gas costs $2.50 or $4.00 – stations do not make windfall profits from high prices; most of that money goes to crude suppliers, refiners, and taxes.[5]
In periods of rapid price increases, gas station margins often get squeezed. Retailers are hesitant to pass on every penny of cost increase for fear of losing price-sensitive customers, so they tend to absorb some of the rise and run slimmer margins.[5] We saw this in 2022 when wholesale prices spiked – station margins temporarily shrank as owners tried to stay competitive.[5] Conversely, when wholesale fuel costs decline, stations may widen their margin slightly, easing pump prices more slowly and recouping lost profits (this is sometimes called the “rockets and feathers” phenomenon). In an environment where the trend is gradually falling prices – as projected for 2025–2026 – many fuel retailers could actually see margin stabilization or improvement.[2][5] With crude oil costs and wholesale prices coming down, gas station operators can purchase fuel more cheaply and then decide how much of that savings to pass to consumers versus keep as margin. Given healthy competition, much of the crude price drop will translate to lower pump prices, but stations might capture a few extra cents per gallon in gross profit compared to turbulent times.[5]
For example, if a station’s wholesale gasoline cost drops by 20 cents per gallon, it might lower its street price by, say, 15 cents to stay attractive, resulting in a modestly higher margin per gallon. Moreover, certain operating costs tied to fuel sales will fall with price. Credit card fees, which are a significant expense for fuel retailers, are typically a percentage of the sale. So a $3.00 gallon incurs a smaller card fee than a $4.00 gallon. Lower prices in 2026 could mean slightly reduced fee costs per gallon (card fees averaged about 8.4 cents per gallon in 2023 when gas was around $3.50; if gas is cheaper, that fee in cents would drop a bit).[5] This provides incremental relief to station owners’ bottom lines. Similarly, if fuel deliveries (by tanker truck) become less costly due to lower diesel prices, the distribution cost to stations may improve marginally.[2][5]
It’s important to put these effects in perspective: even if margins per gallon tick up a few cents, gas station fuel profits remain thin. A net margin of 10–15 cents on a ~$3 gallon is only about 3–5%.[5] Station owners must sell a high volume of fuel – often hundreds of thousands of gallons a month – to cover expenses. Many gas stations rely on convenience store sales (food, drinks, lottery tickets, etc.) for the majority of their actual profit, using fuel primarily as a traffic draw.[5] Over half of gas customers (approximately 57%) also go inside the store when they fill up.[5] Those inside sales have much higher margins than fuel. So, from a profitability standpoint, fuel price trends are a double-edged sword: lower prices may attract more customer traffic (since drivers feel a bit more confident and might drive more when fuel is affordable), but the trade-off is lower revenue per gallon. Higher prices can hurt volume and discourage discretionary trips, even though total fuel revenue is higher – but again, most of that revenue goes to upstream costs, not into the station’s pocket.[5]
In 2026, with fuel prices forecast to be relatively low and stable (nationally), gas stations could see a generally favorable operating environment for fuel sales.[1][2] Stable or gently falling wholesale costs allow for more predictable pricing strategies and reduce the risk of sudden margin squeezes. Stations can focus on marketing and differentiating on service or convenience rather than just reacting to price volatility. Many retailers will likely maintain their typical markup (around 35 cents/gal gross), which, with cheaper product cost, means pump prices will still decline for consumers.[5] Some stations might use the lower wholesale prices as an opportunity to be more competitive on price, temporarily shaving a couple of cents off margins to gain market share. Others might hold prices a bit longer to recover profits lost during past high-cost periods. Overall, gasoline retailing margins in 2026 are expected to be similar to or slightly better than recent years – there’s no indication of a severe margin crunch on the horizon, nor any windfall; just a return to a more normal range as extreme price swings abate.[1][2][5]
One caveat is regional: on the West Coast, where we anticipate higher baseline fuel costs and potential supply tightness, gas station owners could face different challenges.[3][4] If wholesale gasoline in California remains expensive due to refinery shutdowns and import costs, station operators will have to pay more to stock their tanks.[3][4] They may not be able to pass all of that cost to consumers if price competition is fierce or if regulators are watching margins.[3] California’s new oversight on refinery/storage behavior could also indirectly pressure retail prices.[3][4] Thus, in California, station margins might actually tighten if supply costs spike – at least until the market finds a new equilibrium. Stations there will be walking a fine line, trying to cover increased operating costs (fuel procurement, regulatory compliance, higher labor costs in CA, etc.) while not driving away consumers with even higher pump prices. In contrast, in the rest of the country where supply is ample and falling costs prevail, gas stations should be able to manage margins more flexibly.[1][2]
Finally, looking beyond 2026, fuel retailers are keeping an eye on the longer-term trend of demand decline. If gasoline consumption plateaus and then gradually drops (as EV adoption grows and efficiency gains continue), gas stations could see their fuel volumes start to erode. Even if margin per gallon holds, selling fewer gallons per year would squeeze profits.[1] This is one reason many convenience store chains are investing in their food, beverage, and services offerings – and even in EV charging infrastructure – to diversify revenue.[5] For 2026, these shifts will likely still be in early stages nationally, but the impact on margins is more about volume than unit price. A station that pumps, say, 5% fewer gallons in 2026 than in 2025 due to efficiency improvements will need to either cut costs or increase other sales to keep profit steady.[1][5] The positive side is that lower fuel prices could encourage a bit more driving, partially offsetting the efficiency effect (people may take extra trips or larger vehicles when gas is cheap, though this effect is usually modest over short periods).[1]
In essence, gas station profitability in 2026 will depend on balancing volume, margin, and supplemental sales. The forecasted fuel price decline is not so steep as to radically alter consumer behavior overnight, so stations that survived the roller coaster of 2022–2023 are likely well-positioned to handle 2026’s conditions. They’ll enjoy a respite from extreme wholesale price volatility, giving them breathing room to plan and adapt their businesses.
Conclusion
By 2026, U.S. fuel prices are expected to be lower and more stable than the tumultuous peaks of the early 2020s.[1][2] Cheaper crude oil and improving vehicle efficiency are set to bring gasoline averages down to around $3 per gallon nationally – a level not seen in several years.[1] Diesel fuel should likewise ease to the mid-$3 range.[2] This is good news for consumers and businesses, hinting at relief on transportation costs and potentially contributing to broader economic stability (since fuel is a major input for many sectors). However, the benefits won’t be uniform everywhere. California and the broader West Coast face a more complicated reality: even as the rest of the country sees gentle price declines, West Coast motorists could confront higher prices and supply uncertainty as the region adjusts to a post-refining era.[3][4] Policymakers and industry players in California will need to manage this transition carefully to avoid severe price spikes or shortages, at least until alternative supply chains and falling demand eventually rebalance the market.[3][4]
For gas station owners, the 2026 fuel price landscape offers both opportunities and challenges. Lower wholesale costs and a return to more typical margins should make fuel retailing a bit more predictable and possibly more profitable on a per-gallon basis than during recent volatile periods.[1][2][5] Stations can focus on winning customers through service and convenience rather than simply reacting to price swings. Nonetheless, the perennial truth remains: selling fuel is a volume game with razor-thin margins. Gas stations will continue to depend on efficient operations and robust convenience store sales to thrive. The forecasted price changes in 2026 – while noteworthy – are relatively moderate, so the industry is not facing a radical upheaval but rather an incremental step in a long-term energy evolution.
In summary, fuel prices in 2026 are forecast to slightly decrease overall, bringing modest relief at the pump for much of the U.S. (especially compared to 2022’s highs).[1][2] California’s unique refinery closures, however, mean its drivers and gas stations may encounter the opposite: a tighter market with upward price pressure.[3][4] Gas station profitability will hinge on how well retailers navigate these trends – capturing the benefits of lower costs, maintaining reasonable prices for drivers, and adapting to the changing fuel landscape. The coming year will be an important one for both consumers and fuel retailers as they adjust to the new normal of the post-price-surge era, with an eye on the horizon for further changes beyond 2026.
November 14, 2025, by Michal Mohelský, J.D., principal of MMCG Invest, LLC, gas station and USDA feasibility study consultant
Sources
[1] U.S. Energy Information Administration (EIA). Short-Term Energy Outlook (STEO) – Overview and forecast tables for crude oil, gasoline, and diesel prices, and U.S. fuel consumption projections.
[2] U.S. Energy Information Administration (EIA). STEO Petroleum Products – Detailed outlook for gasoline and distillate prices, refining margins (crack spreads), and regional price differentials.
[3] U.S. Energy Information Administration (EIA). Today in Energy article on West Coast gasoline prices, refining capacity changes, and expected regional price impacts through 2026 (including California-specific analysis).
[4] Stillwater Associates and related industry analyses on California refinery shutdowns (e.g., Phillips 66 Wilmington and Valero Benicia), West Coast gasoline supply, and the shift from export parity to import parity in regional pricing.
[5] National Association of Convenience Stores (NACS). Industry data and reports on gasoline retail economics, average station margins per gallon, operating cost structure, credit card fees, and the role of in-store sales in gas station profitability.