The end of federal EV subsidies and a relaxation of CAFE (Corporate Average Fuel Economy) standards are expected to push North American gasoline demand higher than previously anticipated. While fewer EV sales would typically increase gasoline use, the slowdown in CAFE standards appears to be the larger factor.
The CAFE standard drives demand upward
Our analysis indicates that the loosening of CAFE standards will have the most significant impact on gasoline consumption. Relaxed efficiency requirements permit automakers to prioritize the sale of larger, less fuel-efficient vehicles, such as SUVs, over smaller cars.
This shift in the product mix is the primary reason we forecast North American gasoline demand through 2030 to trend toward our high-case scenario, representing an increase of approximately 200,000 barrels per day above the base case. For example, our high-case for 2030 is 9.62 million barrels per day (mb/d), versus 9.40 mb/d in the base case (see Exhibit 1). The policy shift has also prompted carmakers like Ford and GM to scale back short-term EV production and focus more on hybrid offerings.
Exhibit 1. North American gasoline demand in 2030 before and after the EV credit phase-out and relaxation of CAFE rules.
Why EV credit loss isn’t a big deterrent
Although the end of the federal EV tax credit will slow the EV transition, it is not expected to cause a major spike in gasoline demand or alter the demand patterns for gasoline grades. The U.S. EV market is largely driven by affluent buyers, for whom the subsidy was not the sole deciding factor. The subsidy, which covered up to $7,500, helped fill the price gap when new EVs averaged a little less than ~$58,000 compared to ~$48,000 for new gasoline cars.
Following a pre-deadline surge (EV sales in the U.S. peaked at 13% of new vehicle sales in September 2025), the market is expected to correct to around 8.5% in 2026. However, the fundamental economics of EVs are improving. Drivers are realizing lower costs on a per-mile basis, and the total cost of ownership (TCO) for EVs is increasingly attractive over five years or more—although rising electricity prices and grid capacity constraints could complicate this picture. This is most evident in the used EV market, which saw sales rise 59% year-on-year in August as the price gap between used EVs and ICE vehicles narrowed to just $1,000 along with growing availability of the EV charging infrastructure.
Ultimately, this policy setback is expected to widen the gap between the U.S. and global leaders like China and Europe, where electrification is moving much faster.
– Uday Turaga
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