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The U.S. Energy Department projects lower prices for diesel fuel this year and in 2015 compared to the average cost in 2013, according to its just-released Short-Term Energy Outlook.
On-highway diesel fuel prices, which averaged $3.92 per gallon in 2013, are projected to average $3.83 this year and $3.73 in 2015. The forecast is two cents higher for this year than in last month’s report.
The projected U.S. annual average regular gasoline retail price, which fell from $3.63 per gallon in 2012 to an average of $3.51 in 2013, will continue to fall to $3.44 in 2014 and $3.37 in 2015. The projection for this year is down 2 cents from a month ago.
Both expected declines are due to lower crude oil prices, which is expected to average $93 per barrel for West Texas Intermediate crude this year and $90 in 2015. Brent crude oil prices are forecast to weaken as OPEC supply growth exceeds growth in world consumption, averaging $105 per barrel this year and $101 in 2015.
The difference in price between WTI crude oil and Brent crude oil, which averaged $18 per barrel in 2012 and then fell below $4 per barrel in July 2013, averaged $14 per barrel in January 2014. The report calls for this difference to average $11 per barrel over the forecast, “reflecting the economics of transporting and processing the growing production of light sweet crude oil in U.S. and Canadian refineries.”
Another reason crude prices are expected to fall is increased oil production in the U.S., with 2015’s level expected to be near a record high last seen in 1970. However, the 9.2-million-barrels-per-day level was revised down slightly from last month’s report, when it was forecast to beat the 9.6 million barrels per day level from more than 40 years ago.
DOE notes energy price forecasts are highly uncertain and the current values of futures and options contracts suggest that prices could differ significantly from the forecast levels.