The U.S. Energy Information Administration (EIA) has released its latest Short-Term Energy Outlook, highlighting the growing impact of escalating tensions in the Middle East on global oil markets, natural gas supply, and electricity generation trends. The report indicates that disruptions to key shipping routes and production facilities have pushed crude oil prices sharply higher while reshaping energy supply expectations for 2026 and beyond.
Data from the U.S. Energy Information Administration (EIA) in its Short-Term Energy Outlook highlights key trends in oil prices, natural gas markets, electricity generation, and emissions across the United States between 2025 and 2027.
Oil Prices and Fuel Costs
The outlook shows moderate volatility in global oil prices during the forecast period.
The benchmark Brent crude oil spot price is estimated at $69 per barrel in 2025, rising to $79 in 2026 before declining to $64 in 2027 as supply conditions improve.
U.S. retail gasoline prices are expected to average $3.10 per gallon in 2025, increase to $3.34 in 2026, and ease slightly to $3.18 in 2027.
U.S. Oil Production
Domestic oil production remains strong during the forecast period.
U.S. crude oil output is projected to average 13.6 million barrels per day in 2025 and 2026.
Production is expected to increase to 13.8 million barrels per day in 2027, reflecting stronger drilling activity supported by higher oil prices.
Natural Gas Prices and LNG Exports
Natural gas markets are expected to remain relatively stable with gradual growth in exports.
The benchmark Henry Hub natural gas price is forecast to average $3.53 per million British thermal units in 2025, rising to $3.76 in 2026 and $3.85 in 2027.
U.S. liquefied natural gas exports are projected to grow from 15 billion cubic feet per day in 2025 to 17 billion cubic feet per day in 2026, reaching 18 billion cubic feet per day in 2027.
Electricity Generation Mix
The composition of U.S. electricity generation shows gradual growth in renewable energy and a steady decline in coal usage.
Natural gas remains the largest power source, accounting for 40 percent of generation in 2025 and 2026, and 39 percent in 2027.
Coal declines from 17 percent in 2025 to 16 percent in 2026 and 15 percent in 2027.
Nuclear power contributes 18 percent in 2025, increases slightly to 19 percent in 2026, and returns to 18 percent in 2027.
Hydropower remains stable at 6 percent across all three years.
Wind energy grows from 11 percent in 2025 and 2026 to 12 percent in 2027.
Solar power expands steadily from 7 percent in 2025 to 8 percent in 2026 and 9 percent in 2027.
Other energy sources contribute about 1 percent throughout the forecast period.
Economic Growth and Emissions
The report also provides projections for economic growth and carbon emissions.
U.S. GDP growth is estimated at 2.2 percent in 2025, rising to 2.6 percent in 2026, before moderating to 2.1 percent in 2027.
Carbon dioxide emissions are expected to decline slightly from 4.9 billion metric tons in 2025 to 4.8 billion metric tons in both 2026 and 2027.
Overall, the outlook indicates steady energy demand growth, rising LNG exports, gradual expansion of renewable energy, and a slow decline in coal’s share in the U.S. power generation mix through 2027.
Brent Crude Prices Surge Amid Supply Disruptions
Global oil markets have reacted strongly to the onset of military action in the Middle East. The benchmark Brent crude oil spot price settled at $94 per barrel on March 9, marking an increase of roughly 50 percent since the beginning of 2026. This is the highest price level since September 2023.
According to the EIA, the surge in prices is largely driven by disruptions to petroleum shipments through the strategic Strait of Hormuz, a vital chokepoint for global energy trade. Reduced tanker traffic and production shutdowns across parts of the Middle East have tightened global supply.
Middle East Production Expected to Decline Further
In its modeling scenario, the EIA assumes that the effective closure of the Strait of Hormuz could lead to additional declines in Middle East oil production in the coming weeks. However, the agency expects that some of the shut-in production will gradually return as shipping transit through the strait resumes.
The outlook stresses that the duration and intensity of the regional conflict will remain a key factor influencing supply availability and price volatility in the months ahead.
Oil Price Forecast for 2026 and 2027
Despite the recent spike, the EIA expects crude oil prices to stabilize later in the year.
Brent crude prices are forecast to remain above $95 per barrel for the next two months.
Prices are expected to fall below $80 per barrel in the third quarter of 2026.
By the end of 2026, Brent is projected to average around $70 per barrel.
The EIA forecasts an average price of $64 per barrel in 2027.
These projections remain highly dependent on how long the Middle East conflict continues and how severely oil production remains disrupted.
Higher Oil Prices Boost U.S. Production
Rising oil prices are expected to encourage additional output in the United States. The EIA forecasts that U.S. crude oil production will average:
13.6 million barrels per day in 2026
13.8 million barrels per day in 2027
The 2027 projection is 0.5 million barrels per day higher than the agency’s previous forecast, reflecting stronger drilling activity driven by improved price conditions.
Natural Gas Prices Expected to Stay Stable in the U.S.
Although disruptions to liquefied natural gas shipments through the Strait of Hormuz have increased gas prices in Europe and Asia, the U.S. market is expected to remain relatively insulated.
The benchmark Henry Hub natural gas spot price is forecast to average $3.80 per million British thermal units (MMBtu) in 2026, about 13 percent lower than the previous forecast. The reduction is largely attributed to milder temperatures in February that left higher levels of gas in storage.
For 2027, the Henry Hub price is projected to average nearly $3.90/MMBtu, roughly 12 percent lower than earlier projections, due mainly to increased associated gas production tied to higher oil output.
Natural Gas Production and Storage Outlook
The increase in oil drilling is expected to boost associated natural gas production. The EIA projects:
U.S. marketed natural gas production will average 121 billion cubic feet per day in 2026, up 2 percent from 2025.
Production will rise to 124 Bcf per day in 2027, representing an additional 3 percent increase and about 2 Bcf per day higher than last month’s outlook.
U.S. natural gas inventories are expected to end the winter withdrawal season in March at approximately 1,840 billion cubic feet, close to the five-year average between 2021 and 2025. Withdrawals slowed in February after record drawdowns in January linked to extreme cold during Winter Storm Fern.
Electricity Demand and Generation Trends
The EIA also noted continued growth in U.S. electricity generation. After a decade of relatively flat demand between 2010 and 2019, power generation has grown by about 2 percent annually since 2021.
Looking ahead, the agency expects:
1.2 percent growth in electricity generation in 2026
3.1 percent growth in 2027
Much of the demand increase is expected in the Electric Reliability Council of Texas (ERCOT) region, which is experiencing rapid population growth and expanding industrial electricity consumption.
At the same time, coal power generation in the United States is forecast to decline by 7 percent in 2026, as renewable energy capacity expands and utilities retire approximately 4 percent of existing coal-fired generating capacity.
Energy Market Outlook Remains Uncertain
The EIA emphasized that global energy markets remain highly sensitive to geopolitical developments in the Middle East. The outlook for oil prices, natural gas production, and electricity demand will largely depend on how long disruptions persist in the region and how quickly energy supply chains stabilize.
BABURAJAN KIZHAKEDATH
