By Morgan Ellis, Editor at GearUp Insights — About the Editor
If you've noticed the pump feels a little less painful lately, that's not a fluke. The U.S. Energy Information Administration's July 2026 Short-Term Energy Outlook, released July 7, projects retail gasoline prices will keep dropping through the end of the year — and stay lower through 2027. For drivers weighing whether to hold onto a gas car, switch to a hybrid, or go electric, this forecast changes the math a little. Here's what's actually in the numbers, and what it means for your budget.
EIA's July Forecast: The Numbers
The EIA's latest outlook shows U.S. regular gasoline averaging just under $3.80 per gallon in the third quarter of 2026, down from more than $4.20 per gallon in the second quarter. The agency expects prices to fall further to around $3.40 per gallon in the fourth quarter, with the annual average dropping below $3.10 per gallon in 2027.
The driver behind the forecast is crude oil. Brent crude averaged $85 per barrel in June, down $22 from May, and the EIA's forecast puts Brent at $74 per barrel in the third quarter of 2026, falling to $65 per barrel in 2027 as global inventories build.
Why Prices Are Falling
Two things are doing most of the work here. First, global oil supply has increased following the reopening of the Strait of Hormuz, a key shipping chokepoint, which eased fears of supply disruption and pushed crude prices down. Second, U.S. refiners have been increasing gasoline yields and maximizing production, while gasoline imports into the East Coast and exports out of the Gulf Coast have both shifted in ways that add to domestic supply.
That said, the EIA notes a wrinkle: even as crude oil prices fall, refiner and retail margins have been elevated because gasoline inventories remain tight. That's expected to ease as inventories rebuild through the back half of the year, which is part of why the price drop shows up more in the fourth quarter than the third.
What This Actually Means for Your Wallet
Here's a rough sense of the swing, using the EIA's quarterly figures and the Federal Highway Administration's estimate that the average U.S. driver covers about 13,596 miles a year:
| Quarter | EIA Forecast Price (per gallon) | Est. Cost for 3,400 Miles |
|---|---|---|
| Q2 2026 | ~$4.20+ | ~$571 |
| Q3 2026 | ~$3.80 | ~$517 |
| Q4 2026 | ~$3.40 | ~$463 |
| 2027 Annual Avg | Below $3.10 | ~$421 |
Assumes a vehicle averaging 25 mpg combined and one quarter's worth of average annual mileage (~3,400 miles). Actual savings depend heavily on your vehicle's fuel economy and driving habits — this is illustrative, not a personalized estimate.
On that basis, the gap between Q2 and Q4 2026 pricing works out to roughly $100 per quarter, or somewhere in the neighborhood of $400 a year if the Q4 price held for a full twelve months. For a two-car household, that adds up faster.
It's Not Uniform Everywhere
The EIA's national forecast masks real regional variation. The agency has separately noted that declining U.S. refinery capacity this year may partially offset the benefit of falling crude prices, particularly on the West Coast, where refining capacity is tighter and price swings tend to be sharper in both directions. If you're in a state that already runs a premium over the national average — California and much of the West Coast typically do — expect the relief to arrive, but by less than the headline number suggests.
Does This Change the Math on Gas vs. EV or Hybrid?
Cheaper gas doesn't erase the ownership-cost gap between gas, hybrid, and EV — it narrows it, at the margins. If you've been running the numbers with our EV vs Hybrid 5-Year Cost Calculator, it's worth rerunning them with an updated gas price assumption closer to $3.40–$3.80/gallon rather than $4.20+. For a deeper look at how the total cost of ownership shakes out across vehicle types, see our breakdowns on hybrid vs. gas total cost of ownership and when a hybrid is cheaper than an EV. If you're charging at home, our Charging Cost Calculator can show you where electricity costs stand by comparison.
Our Take
Falling gas prices are good news for anyone's monthly budget, but they're a forecast, not a guarantee — EIA revises these numbers monthly, and geopolitical shocks have a way of making fools of six-month-out projections. Enjoy the relief at the pump if it materializes. Just don't let a good quarter talk you out of doing the actual math on your next car.
Data sourced from the U.S. Energy Information Administration's July 2026 Short-Term Energy Outlook and the Federal Highway Administration. This article is for informational purposes and does not constitute financial advice.