DOE Says Diesel, Fuel Prices Will Remain High Through 2007

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iesel fuel is projected to average $2.49 per gallon this year before retreating to $2.42 in 2007, the Department of Energy said Tuesday.

Diesel demand is projected to show almost 4% per year growth this year and next as the economy continues to expand and as fuel prices eventually ease slightly, DOE’s Energy Information Administration said in its monthly Short-Term Energy Outlook.

Diesel moved past $2.50 a gallon for the first time in DOE's weekly survey, jumping 7.4 cents to $2.545 a gallon. (Click here for previous coverage.)

Gasoline prices this summer are expected to rise above $2.50 per gallon. Retail regular motor gasoline is projected to average $2.42 this year, 15 cents over last year, and $2.36 per gallon in 2007, EIA said.

Continued world demand growth, combined with only modest increases in production capacity, along with the continuing risks of geopolitical instability, are expected to keep crude oil prices high through this year.

The price of light sweet crude oil is projected to average $64 per barrel in 2006 before retreating to $61 in 2007, EIA said.