DOE Projects Diesel Prices to Average 26% Higher This Year

he Department of Energy said diesel prices would average $2.29 this year — 26% higher than last year’s $1.81 average price. Gasoline will average $2.21, about 17% higher than last year’s $1.85 average, DOE said.

Motor fuel prices are expected to rise 2% to 3% in 2006, versus the larger increases forecast for 2005, DOE’s Energy Information Administration said in its monthly Short-Term Energy Forecast released Wednesday.

EIA projects diesel prices will average 55 cents and gasoline 35 cents over last summer’s levels this summer, resulting in increases in motor fuel prices for the third year in a row.

Oil prices are sensitive market factors such as unexpected losses in supplies or surges in demand, which could cause prices to average above $60 per barrel, EIA said.

Other factors include hurricanes, security threats, refinery outages and the production ability of non-OPEC countries to produce enough oil to help meet world demand, EIA said.

Worldwide petroleum demand growth is projected to remain strong through 2006, though not as strong as 2004, EIA said. World demand growth is expected to average 1.8 million barrels a day from 2004 to 2006, a 2.1% annual average increase, compared with a 3.2% increase in 2004.

This projection is lower than EIA’s previous outlook that showed an annual growth rate of 2.5% in 2005 and 2006.

One reason for the lower projection is that Chinese oil demand growth, estimated at almost 1 million barrels a day in 2004, is projected to grow more slowly, at 500,000 barrels a day in 2005 and 2006. This is also down from a previous EIA projection of 600,000 barrels a day for 2005 and 2006.

The latest weekly national average diesel price, reported Monday, was $2.407 a gallon, just 0.1 cent off the record set July 11. Gasoline reached a new record of $2.368, topping its previous record by 4 cents.

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