The U.S. Energy Information Administration is having a hard time predicting where fuel and oil prices will go, as its Short-Term Energy Outlook released this week predicted prices far higher than the same report just two months ago.

The EIA now predicts that diesel fuel prices will remain around $4.71 per gallon over the next few months. The agency is projecting diesel prices will average $4.32 per gallon in 2008 and 2009, an increase of $1.44 a gallon over the 2007 average.

Crude oil prices now are projected to average $122 per barrel in 2008 and $126 per barrel in 2009.

Just two months ago, in its April short term-outlook, the agency was predicting a 2008 average of $3.62 per gallon for diesel fuel over the course of 2008. It also predicted that West Texas Intermediate crude oil prices, which averaged $72.32 per barrel last year, would average $101 a barrel in 2008, dropping to $92.50 per barrel in 2009.

"Supply uncertainties in several oil exporting regions, coupled with healthy demand growth in the emerging market countries, continued to pressure oil markets," the agency said. "The overall picture of strong demand and tight supply is expected to continue."

The higher diesel price average, the agency said, "reflects strength in diesel demand, particularly in emerging markets, that has significantly increased the margins between diesel prices and crude oil costs from those of last year."

The agency noted that world oil consumption is projected to grow by 1 million barrels per day (bbl/d) in 2008. U.S. consumption of liquid fuels and other petroleum is expected to decline by about 290,000 bbl/d in 2008 because of higher petroleum product prices and slower economic growth. Adjusting for increased ethanol use, U.S. petroleum consumption is projected to fall by 440,000 bbl/d in 2008.