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Diesel Prices Expected to Fall Some This Year

February 6, 2007

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Diesel prices will average $2.60 this year, down from $2.71 last year but still well above the $2.41 average for 2005, according to the latest short-term energy outlook by the U.S. Energy Information Administration.

Unseasonably warm temperatures in the U.S. and most of the northern hemisphere from mid-December through mid-January helped trim $12 a barrel off the price of West Texas Intermediate crude oil, dropping it to $50.51. With colder weather, the projected average for February has been adjusted upward to $56 per barrel. EIA projected an average $62.50 per barrel for all of 2007, compared to $66 in 2006.
In global petroleum markets, lower OPEC output in the fourth quarter resulted in increased spare production capacity, providing a cushion against unanticipated supply problems. Despite reduced production, inventory levels at year-end were above normal. A scheduled second round of production cuts, coupled with increased global demand, would put inventory levels in the middle of the normal range by mid-2007, which would support production increases in the second half of the year, the agency said.


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