November 8, 2005 3:00 PM, EST

DOE Projects Diesel Prices to Decline Gradually Into '06

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etail diesel fuel prices will average $2.85 a gallon in the fourth quarter, then fall for the first three quarters of 2006 to a third-quarter low of $2.49 before rising again, according to projections released Tuesday by the Department of Energy.

he prices for the first three quarters of 2006 will be, respectively, $2.58, $2.51 and $2.49, before rising to $2.68 in next year’s fourth-quarter, DOE said in its monthly Short-Term Energy Outlook released Tuesday.

Diesel prices were at record levels in October, with an average of $3.095 a gallon over the five reported weeks — though four of those weeks were between $3.144 and the record $3.157 set on Oct. 24, according to DOE figures.

This year’s projected fourth-quarter price of $2.85 a gallon is 75 cents higher than last year’s $2.10, DOE said.

DOE also cut its estimate of home heating-oil costs to consumers this winter from previous cost estimates, though it projects heating-oil prices will be 27% higher than last year.

Heating oil and diesel fuel are both distillate fuels and their prices often parallel each another during winter months.

DOE cut its estimate of 2005 global oil demand by 100,000 barrels a day, forecasting growth of 1.1 million barrels, or 1.2%, and predicted demand next year will rise by 1.8 million barrels, or 2.2%.