The U.S. Energy Department’s Energy Information Administration has released a new forecast in which it predicts diesel prices later this year and next will be lower than their current level.

In its short-term outlook, the DOE projects that on-highway diesel fuel retail prices will average $3.92 per gallon in 2013 and $3.82 per gallon in 2014, after averaging $3.97 per gallon in 2012.

The current weekly average is $4.104 per gallon, and on-highway diesel fuel retail prices averaged $4.02 per gallon in the fourth quarter of 2012 due to tight market conditions and strong demand for exports.

U.S. regular gasoline retail prices averaged $3.63 per gallon in 2012, but rose in January because of the combination of increasing crude prices and refinery outages, said EIA. Despite the recent run-up in prices, it expects falling crude prices will lead to regular gasoline retail prices averaging $3.55 per gallon in 2013 and $3.39 per gallon in 2014.

EIA projects the Brent crude oil spot price will fall from an average of $112 per barrel in 2012 to annual averages of $109 per barrel and $101 per barrel in 2013 and 2014, respectively, reflecting the increasing supply of liquid fuels from non-OPEC countries.

After averaging $94 per barrel in 2012, the projected West Texas Intermediate price should average $93 per barrel in 2013 and $92 per barrel in 2014. By 2014, several pipeline projects from the midcontinent to the Gulf Coast refining centers are expected to come on line, reducing the cost of transporting crude oil to refiners, which is expected to reflect in a smaller difference in the prices between WTI and Brent crude from an average $18 per barrel in 2012 to $9 per barrel in 2014.

The administration cautions that energy price forecasts are highly uncertain due to the volatility of the markets, which can result in prices suddenly spiking or declining.

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