Expected prices for diesel — trucking’s primary fuel — and gasoline have been revised higher, due largely to anticipated higher prices for crude oil, according to a new Energy Department report.
Its latest Short-Term Energy Outlook projects that the national average retail cost of on-highway diesel, including tax, will average $3.13 for the second quarter, up 6.7% from the forecast made a month earlier.
The average retail cost of on-highway diesel is expected to increase even more than the month-ago projections for the third and fourth quarters, 9.5% and 9% higher, respectively, with an average price of $3.17 per gallon in the third quarter and $3.16 per gallon for the fourth quarter.
The average diesel price for all of 2018 is forecast to be $3.12 per gallon, 6.4% higher than the projection from a month earlier. This also compares to an average 2017 actual cost of $2.65 per gallon and $2.31 per gallon for all of 2016.
The average 2019 cost is expected to moderate slightly, coming in at $3.01 per gallon, but that’s 3.8% higher than the department forecast in April.
Similar revisions were made by the Energy Department when it comes to the average national retail cost of regular grade gasoline, including taxes. It’s projected to average $2.90 in the current quarter, $2.91 in the third quarter, and $2.75 in the final quarter of this year.
For all of 2018, this grade of gasoline is forecast to cost $2.79 per gallon, 5.4% more than the department was calling for a month earlier, and $2.71 per gallon for all of 2019. This compares to an average cost of $2.42 and $2.15 per gallon for 2017 and 2016, respectively.
Driving these fuel prices higher is the expectation of higher crude oil prices. Brent spot prices are expected to average $71 per barrel in 2018 and $66 per barrel in 2019, which are $7 and $3 higher, respectively, than in the April outlook. West Texas Intermediate (WTI) crude oil prices are expected to average $5 per barrel lower than Brent prices in both 2018 and 2019.
Average prices for both Brent and WTI crude oil are expected to average 10.5% and 11.6% higher in 2018, respectively, than the forecast a month earlier. If this happens, it would result in prices this year being about $15 per barrel more than they were in 2017 and around $20 per barrel or more than they were in 2016.
At the same time, the department believes the U.S. will increase domestic crude oil production, eventually putting downward pressure on crude prices in late 2018, pushing them down even more in 2019.