Following a recent spike in crude oil and diesel prices, the U.S. Department of Energy's current Short-Term Energy Outlook projects that diesel will run at $3.14 per gallon over the winter months (October 1 to March 31), before leveling out at a projected average for the year of $3.23 per gallon.


The winter price is an increase of 35 cents per gallon over last year. In last month's price forecast, DOE predicted diesel would average $3.09 a gallon over the winter.

On Monday, DOE's latest fuel price update showed diesel up 3.5 cents a gallon from the previous week, hitting its highest price since October 2008. The current national average cited by DOE of $3.22 is 42 cents higher than a year ago. Regional average prices around the country ranged from a high of 3.35 in California to a low of 3.13 in the Gulf States. Prices in New England and Central Atlantic states hovered around 3.30.

The DOE's energy information administration expects the price of West Texas intermediate crude oil to average about $84 per barrel this winter, more than $6 higher than the average price last winter, and a dollar higher than it had predicted last month. Projected WTI prices rise to $89 per barrel by the end of 2011, a $2 per barrel increase from last month's Outlook.

Oil prices on Tuesday jumped above $90 a barrel for the first time in more than two years. While oil prices have held stable between $70 and $80 per barrel for more than a year, Wall Street analysts are predicting that oil will hit $100 per barrel sometime next year, possibly as early as spring, driven by foreign demand and strengthening domestic economic performance.

EIA expects regular-grade gasoline retail prices to average $2.88 per gallon this winter, 22 cents per gallon higher than last winter.

More details on the Short-Term Energy Outlook are available on the EIA website.