A new fuel price forecast from the U.S. Energy Department shows little change from expectations a month ago for the price of diesel, but the outlook for gasoline has moved a little higher.
The latest Short Term Energy Outlook, released Tuesday, calls for on-highway diesel retail prices to average $2.11 per gallon during the summer driving season, down from an average of $2.74 last summer. The department defines the summer driving season as April through September.
Diesel prices are expected to increase only slightly as 2016 moves forward, hitting an average of $2.15 per gallon in the final quarter of the year. The actual average for the first quarter of the year was $2.07 per gallon. For all of 2016 the price is expected to average $2.11 per gallon, down 1 cent from last month’s forecast. It is forecast to average $2.33 per gallon in 2017, up only a penny from March’s projection.
The department expects the retail price of regular-grade gasoline to average $2.04 per gallon this summer, down from an average of $2.63 per gallon last summer. If this happens, this would mark the lowest summer average since 2004.
Regular-grade gasoline is expected to average $2.07 per gallon in the second quarter, up 4.8% from last month’s forecast, following an actual first quarter average of $1.88 per gallon. It is expected to fall to $1.79 per gallon in the final quarter of 2016, unchanged from the previous projection.
For all of 2016, regular-grade gasoline is forecast to average $1.94 per gallon. That's down from $2.43 in 2015, but it is 2.4% greater than the expectation a month ago. The 2017 price is expected to average $2, up 1.3% from the previous forecast.
According to the department, if the 2016 gasoline price forecast is met, it would save the average U.S. household about $350 compared with 2015, with annual average motor fuel expenditures at the lowest level in 12 years.
Prices for both domestic and imported crude oil are expected to be only slightly higher for all of this year. West Texas Intermediate is forecast to average $34.60 this year and $40.58 next year, compared to the 2015 average of $48.67 and a 2014 average of 93.17. Prices for Brent crude, which are usually a few dollars more, are projected to be nearly the same as WTI this year and next.
Helping to keep oil prices down is U.S. consumption of distillate fuel, which includes diesel fuel and heating oil. Use of these fuels fell by 60,000 barrel per day, or 1.5%, in 2015, and it's expected to fall by an additional 70,000 barrels per day, or 1.8%, in 2016. Falling distillate consumption in 2016 is the result of warm winter temperatures, lower rates of oil and natural gas drilling activity, and falling coal production that has reduced diesel use in rail shipments of coal, according to the department. It expects stronger economic growth in 2017 will contribute to distillate fuel consumption growth of 140,000 barrels per day, or 3.5%.
Also keeping a lid on oil prices and consequently fuel prices has been the continuing build in crude inventories, with the rate expected to fall in 2017 to a fraction of what is expected for all of this year.