Federal government expectations for diesel and gasoline prices for this year have been revised significantly lower, as oil is expected to continue to sell for far less that it was in mid-2014 when it was more than $100 per barrel.
The latest Short Term Energy Outlook from the U.S. Energy Department project's trucking’s main fuel will average $2.29 per gallon in 2016. That is down 38 cents from its projection just a month ago. The DOE expects diesel prices to rise to an average of $2.59 per gallon in 2017. This compares to a 2015 average of $2.71.
The department is forecasting even lower prices for regular grade gasoline, with an average $2.03 per gallon in 2016. That's down from a projection of $2.36 last month. Looking further ahead, the DOE analysis projects $2.21 per gallon in 2017, compared with $2.43 per gallon in 2015. It's expected to reach a seven-year low of $1.90 per gallon in February 2016, before rising in the spring.
The lower projections were triggered by the expectation that average crude oil prices wil not head higher. Crude prices hit their lowest level in more than a decade this week due to a continued worldwide oversupply.
U.S. benchmark West Texas Intermediate crude, which averaged $48.67 per barrel in 2015, is expected to average $38.54 this year. That projection is down 24.3% from December’s forecast. The DOE estimates it will move higher to $47 in 2017. This compares to an average of $93.17 for 2014. Overseas crude prices are projected to be only a few dollars more.
The department cautions there is “high uncertainty in the price outlook” when it comes to oil, which usually affects diesel and gasoline prices.
The Energy Department estimates that global oil inventories increased by 1.9 million barrels per day in 2015, marking the second consecutive year of inventory exceeding consumption.
“This oversupply has contributed to oil prices reaching the lowest monthly average level since mid-2004,” the department said in the report. “Inventories are forecast to rise by an additional 0.7 million barrels per day in 2016, before the global oil market becomes relatively balanced in 2017. The first draw on global oil inventories in 15 consecutive quarters is expected in the third quarter of 2017.”