Diesel prices this year are expected to average slightly less than they were last year and continue moving lower next year, according to a new forecast.

The U.S. Energy Department and its Energy Information Administration’s new Short-Term Energy Outlook says the fuel, which was $3.97 per gallon in 2012, is projected to average $3.92 per gallon in 2013 and $3.76 per gallon in 2014. The expectation for this year is 4 cents higher than last month’s forecast but remains the same for 2014.

At the retail level, EIA expects diesel fuel prices to be most affected by higher biodiesel blending yields. On Tuesday the U.S. Environmental Protection Agency finalized an earlier proposal requiring that 2.75 billion gallons of advanced biofuel, such a biodiesel, be blended into the U.S. fuel supply this year.

Gasoline Prices

EIA expects the regular gasoline retail price to average $3.59 per gallon in the third quarter of 2013, and the annual average price to decline from an average of $3.63 per gallon in 2012 to $3.52 per gallon in 2013 and to $3.37 per gallon in 2014.

It notes U.S. regular gasoline retail prices increased from an average of $3.50 per gallon to $3.68 per gallon over the first three weeks of July. Prices have declined over the past two weeks, reaching $3.63 per gallon on August 5. Isolated refinery outages and regional disruptions have contributed to greater volatility in regional gasoline prices across the United States this year. Some of the greatest volatility was again seen across the Midwest. EIA expects gasoline prices to slowly fall from their mid-July levels as crude oil prices begin to fall and the summer driving season comes to a close.

Oil Prices

EIA expects that the Brent crude oil spot price, which averaged $108 per barrel over the first half of 2013, will average $104 per barrel over the second half of 2013, and $100 per barrel in 2014.

After averaging $94 per barrel in 2012 and increasing to $105 per barrel in July 2013, the forecast West Texas Intermediate crude oil spot price averages $97 per barrel in 2013 and $93 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 reflected in a narrowing in the WTI price discount to Brent next year.

The full report is available from the DOE/EIA webiste.