Despite the first upturn since November in average diesel prices this week, expect prices to move slightly lower at least for a while longer, according to the U.S. Energy Department and its latest Short-Term Energy Outlook released on Wednesday.
It has lowered is forecast for the average cost of on-highway diesel this year to $2.83 per gallon, down 2 cents from last month’s report and is in sharp contract to last year’s average of $3.83.
The fuel is expected to average $2.87 in the first quarter of the year before slipping a little more to $2.71 in the second quarter. In the third quarter it is forecast to move higher to $2.78 before averaging $2.98 in the final quarter of 2015.
In 2016 DOE expects diesel to average $3.24.
This forecast come as the department predicted oil prices of $55 per barrel for benchmark West Texas Intermediate crude this year, up less than 50 cents from last month’s forecast, and $71 in 2016, though it says there is “very high uncertainty in the price outlook.”
It said the 50% drop in oil prices from the highest levels seen last year are due to “continued growth in U.S. tight oil production and strong global supply, amid weaker global oil demand growth, which contributed to rising global oil inventories.” Also U.S. inventories of crude oil lately have reportedly been the highest ever.
The U.S. is projected to produce 9.3 million barrels of crude oil per day of oil this year and 9.5 million in 2016, close to the record 9.6 million barrels per day hit in 1970.
Regular grade gasoline prices are expected to average $2.33 this year, nearly the same as DOE’s report from a month ago, and compares to an average of $3.44 in 2014. The 2016 average is forecast at $2.73.
“The average household is now expected to spend about $750 less for gasoline in 2015 compared with last year because of lower prices,” the department said in the report.