America is entering a split energy market. Oil exposure is becoming more expensive and more geopolitical, while abundant domestic natural gas is providing a partial cushion for power producers, manufacturers, and some households. The latest Short-Term Energy Outlook from the U.S. Energy Information Administration, released August 11, makes that divergence unusually clear.
EIA now forecasts the U.S. retail gasoline price to average $3.78 per gallon in 2026. It expects Brent crude oil to average about $85 per barrel in the third quarter as disruptions restrict shipments through the Strait of Hormuz. At the same time, EIA cut its third-quarter Henry Hub natural-gas forecast to $2.87 per million British thermal units—50 cents below its July projection—because production is robust, LNG feedgas demand is lower, and storage is near record levels.
This is not a contradiction. Oil and natural gas are connected, but they are not interchangeable markets. Their infrastructure, trade exposure, storage, end uses, and regional constraints differ. For American households and investors, the practical result is a mixed bill: transportation remains vulnerable to overseas chokepoints, while domestic gas abundance can restrain some electricity, heating, and industrial costs.
Executive Takeaways
- Confirmed: EIA forecasts U.S. retail gasoline to average $3.78 per gallon in 2026, compared with $3.10 in 2025.
- Confirmed: The agency raised its third-quarter Brent forecast to about $85 per barrel, $11 above its July outlook.
- Confirmed: EIA expects Henry Hub natural gas to average $2.87 per MMBtu in the third quarter, down 50 cents from last month’s forecast.
- Analysis: The household energy burden will depend increasingly on whether a family’s costs are tied to globally traded oil or to domestically abundant natural gas and electricity.
The Verified Baseline
EIA completed its August forecast on August 6 and published it on August 11. The agency assumes that oil shipments through the Strait of Hormuz remain severely constrained through August and begin increasing slowly in September. It estimates that crude oil and petroleum liquids moving through Hormuz averaged 4.9 million barrels per day in the second quarter of 2026, down from 21.6 million barrels per day in the fourth quarter of 2025 before the conflict.
EIA also estimates that production shut-ins averaged 5.5 million barrels per day in July. It expects global oil inventories to fall by an average 3.8 million barrels per day in the third quarter after a 4.2-million-barrel-per-day decline in the second quarter. Under those assumptions, Brent averages around $85 in the third quarter and $78 in the fourth quarter before declining toward a $69 average in 2027 as production and trade normalize.
The U.S. is producing more crude oil—EIA forecasts 13.8 million barrels per day in 2026 and 14.2 million in 2027—but domestic production does not isolate American fuel prices from the global market. Crude oil and refined products move through international trade, and U.S. refiners respond to global prices, export demand, inventories, refinery utilization, and regional logistics.
The inventory signal is important. EIA expects U.S. commercial crude inventories to remain below the five-year low through the end of 2026. Its annual forecast now places 2026 inventories at 396 million barrels, 8.6 percent below the July forecast of 433 million. Lower inventories reduce the system’s buffer when refineries, pipelines, ports, or overseas supply routes are disrupted.
Why Natural Gas Is Moving the Other Way
Natural gas is telling a different story. EIA forecasts Henry Hub at $2.87 per MMBtu in the third quarter, down 50 cents from the July projection. The agency cites reduced feedgas demand at LNG export terminals and record natural-gas production. Maintenance at Freeport LNG is affecting 2.0 billion cubic feet per day of nominal export capacity through late August, lowering near-term Gulf Coast demand.
Storage is the key domestic cushion. EIA forecasts working natural-gas inventories of 3,985 billion cubic feet at the end of October, which would be the highest level heading into winter since 2016 and 5 percent above the five-year average. It expects Henry Hub to remain below $3 through October.
That does not mean every utility bill will fall. Retail electricity and gas bills include generation fuel, transmission, distribution, infrastructure investment, taxes, regulation, weather effects, and local rate cases. Regions have different power mixes. A low Henry Hub benchmark can reduce fuel pressure without reversing every other cost.
America has a domestic gas cushion—but its gasoline bill still clears through a global oil market.
The Inflation Connection
Energy affects inflation through more than the gas-station sign. Gasoline directly enters the Consumer Price Index. Diesel influences freight, agriculture, construction, and delivery costs. Jet fuel affects airlines. Petrochemical inputs touch packaging and manufactured goods. Natural gas affects electricity generation, industrial heat, fertilizer production, and winter heating.
The latest confirmed CPI report showed how quickly energy can move the headline. In June, the energy index fell 5.7 percent and gasoline fell 9.7 percent, pulling monthly CPI down 0.4 percent. Yet energy remained 15.7 percent higher than a year earlier, and gasoline was up 26.7 percent. EIA’s August outlook suggests that oil-related relief cannot be assumed to continue.
The important distinction is between a forecast and an observed price. EIA’s $3.78 gasoline figure is a 2026 annual average projection, not a promise that every driver will pay that amount today. Prices vary by state, grade, taxes, transportation costs, and local supply. Likewise, the $2.87 Henry Hub forecast is a wholesale benchmark, not a household utility rate.
Household Impact
Households should divide their energy exposure into three buckets. The first is transportation: gasoline, diesel, commuting distance, vehicle efficiency, and travel. The second is the home: electricity, natural gas, propane, or heating oil. The third is embedded energy: the fuel cost inside food, deliveries, services, and manufactured goods.
A household that drives long distances can feel the oil shock immediately even if natural gas is cheap. A family with gas heating may benefit from strong storage only when utility fuel adjustments and local rates transmit the wholesale change. A rural household using propane or heating oil may face a different path entirely.
The practical response is to budget from gallons and usage, not headlines. Record recent monthly fuel consumption, estimate the effect of a 25- or 50-cent-per-gallon move, and keep that amount in the transportation budget. Review utility rate notices before assuming lower Henry Hub prices will reach the bill. Combine errands, maintain tire pressure, and avoid replacing a reliable vehicle solely in response to a volatile month.
Market Impact
The split creates different exposures across sectors. Upstream oil producers may benefit from higher crude prices, but refining margins depend on product demand, crude input costs, capacity, and inventories. Airlines, trucking companies, logistics operators, agriculture, and consumer businesses can face higher fuel or freight costs. Companies with effective hedges or pricing power are better positioned than those competing on thin margins.
Cheap natural gas can support gas-fired power generators, chemicals, fertilizer, metals, and other energy-intensive industries. It can also strengthen the competitive case for American manufacturing. Yet LNG exporters can face a near-term operational drag when maintenance reduces feedgas demand, even as longer-run export capacity and international price spreads remain supportive.
Investors should examine the full chain rather than treating “energy” as one trade. The relevant questions are commodity exposure, hedge duration, transportation constraints, balance-sheet strength, capital discipline, regulatory treatment, and the ability to pass costs to customers.
Scenario Map
Scenario 1 — Chokepoints ease. Hormuz flows recover faster than EIA assumes, shut-in production returns, and inventories begin rebuilding. Oil and gasoline pressure would likely moderate sooner. Transportation-sensitive businesses and households gain relief, while some oil producers lose pricing support.
Scenario 2 — The split persists. Oil remains tight through the third quarter while U.S. gas storage stays high. Drivers keep paying a geopolitical premium, but natural-gas users receive a domestic supply cushion. This is EIA’s broad baseline direction, though actual prices can differ materially from the forecast.
Scenario 3 — A wider disruption. Shipping threats spread, alternative routes prove insufficient, or inventories fall faster than expected. Oil and refined products move higher, increasing inflation pressure and freight costs. Natural gas may remain domestically abundant, but global LNG prices and export incentives could strengthen.
Scenario 4 — Extreme domestic weather. A hot late summer or cold early winter lifts gas-fired power demand and storage withdrawals. The natural-gas cushion narrows even if oil disruptions do not worsen. Electricity and heating exposure then matter alongside gasoline.
These are conditional analytical frameworks, not probability-weighted forecasts.
What to Watch
- Hormuz shipment volumes: The speed of normalization is central to EIA’s oil-price path.
- U.S. crude inventories: Stocks below the five-year low leave less protection against operational disruptions.
- Refinery utilization and product stocks: Crude supply alone does not determine gasoline and diesel availability.
- Freeport LNG maintenance: Its completion can restore feedgas demand and change the natural-gas balance.
- October gas storage: EIA’s 3,985-Bcf forecast is the key winter cushion.
- CPI energy components: Watch whether gasoline reverses June’s decline and how energy affects headline inflation.
Action Checklist
- Calculate household fuel exposure in gallons and miles, not only dollars.
- Review whether home heating is tied to natural gas, electricity, propane, or heating oil.
- Stress-test business margins for higher freight and diesel costs.
- Separate upstream oil, refining, pipeline, utility, LNG, and industrial exposures in portfolios.
- Treat EIA projections as scenario baselines and update decisions when observed inventories and prices diverge.
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Sources & Methodology
This analysis uses the EIA Short-Term Energy Outlook overview, August 11, 2026, EIA’s detailed sections on global oil markets and natural gas, and the BLS Consumer Price Index report for June 2026. EIA projections depend on stated assumptions and are subject to revision. Observed data, agency forecasts, RedWaveBrief analysis, and conditional scenarios are identified separately. This is not individualized investment advice.
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