WASHINGTON, D.C. --- A new report from the Energy Department projects that U.S. domestic energy demand in 2006 and 2007 will increase at an annual rate of about 1.4 percent each year, resulting in continued market tightness and high prices for oil and natural gas. Retail regular gasoline prices, which averaged $2.27 per gallon in 2005, are projected to average $2.41 in 2006 and $2.33 in 2007. Henry Hub natural gas prices, which averaged $9 per thousand cubic feet in 2005, are estimated to average $9.80 in 2006 and $8.84 in 2007. The Energy Department's Energy Information Administration (EIA) released the report, titled “Short-Term Energy Outlook,” this week. The report forecasts that prices for crude oil, petroleum products and natural gas will stay high through 2006 before starting to weaken in 2007. The study cited the price of West Texas Intermediate (WTI) crude oil, which averaged $56 per barrel in 2005 but is projected to average $63 per barrel in 2006 and $60 in 2007. Meanwhile, the progress on recovery of natural gas and crude oil production and refinery output in the Gulf Region continues. Only one crude oil refinery in New Orleans remains out of service, and it is expected to resume operations during the first quarter of this year. About 27.4 percent of normal daily federal Gulf of Mexico oil production and approximately 19.5 percent of federal Gulf of Mexico natural gas production remain shut-in as a result of hurricanes Katrina and Rita. As in 2005, global petroleum markets this year will be driven by such factors as low world spare oil production capacity and rapid world oil demand growth. Other factors are less certain, such as the occurrence and impact of extreme weather or geopolitical instability, the report said.