EIA: Diesel Prices to Reflect Recovery in Fuel Demand

In the February edition of its monthly Short-Term Energy Outlook released this week, the DOE's Energy Information Administration slightly lowered its expectation for diesel prices in 2010 and slightly raised its projection for 2011.

The EIA said it expects diesel prices to average $2.95 per gallon in 2010 and $3.16 in 2011, off from last month's projections of $2.98 and $3.14 a gallon, respectively. The agency attributes the diesel prices to the expected recovery in the consumption of diesel fuel in the U.S., and the growth of distillate fuel usage outside of the U.S.

Last week, diesel was down over a nickel to $2.781 per gallon, its third straight weekly drop. This week, the EIA has been delayed in releasing its weekly diesel report because of snowstorms ravaging the East Coast.

Meanwhile, the EIA points out that crude oil prices have continued to fluctuate in the last month, rising to $83.12 on Jan. 6 and falling to $72.85 on Jan. 29. The EIA has not changed its crude oil price forecast from last month's edition, with West Texas Intermediate crude oil expected to average $81 a barrel over the second half of this year and $84 a barrel in 2011.

The EIA says gasoline retail prices have followed crude oil prices over the last few months in terms of its fluctuations. Gas prices are projected to average $2.84 per gallon in 2010 and $2.97 per gallon in 2011, the EIA reports.

"Average regular-grade pump prices may top $3 per gallon at times during the upcoming spring and summer and will easily pass that benchmark in high-cost regions, such as the West Coast," the report said. "Due to forecast growth in motor gasoline consumption, the difference between the average gasoline retail price and the average cost of crude oil increases slightly in both 2010 and 2011."