Diesel Prices Seen Falling Slightly Despite High Demand, DOE Says

iesel demand is projected to remain strong worldwide, though prices will fall slightly next year to an average of $2.78 a gallon over this year’s $2.81 average, the Department of Energy said Tuesday.

Distillate fuel consumption — which includes diesel and home heating oil — will increase 1.8% in 2006 and 2.2% in 2007 following last year’s 1.3% gain, DOE said in its monthly short-term energy forecast.

Gasoline retail prices have fallen 42 cents from $3.04 per gallon on in early August to $2.62 per gallon Monday, and will fall to an average of $2.55 a gallon in January before rising again next summer, DOE said.

Crude oil will average about $70 a barrel this year and next year, the report said. Oil prices continued a recent downward trend Tuesday, falling $1.85 to close at $63.76 a barrel on the New York Mercantile Exchange, the lowest since late March, Bloomberg News reported.

Projected world petroleum consumption growth is 1.2 million barrels per day in 2006 and 1.7 million in 2007, despite prevailing high prices, DOE said.

These estimates are DOE’s second consecutive monthly downward revision in response to slower-than-expected demand growth in North America and Western Europe. Over half of the demand growth next year is projected to come from the United States and China.

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