EIA sees higher diesel prices in 2008

Higher crude oil prices and projections of lower distillate inventories likely will drive on-highway diesel prices to a higher average in 2008 than in 2007, the U.S. Department of Energy’s Energy Information Administration reported Oct. 9. EIA projects average retail diesel fuel prices in 2008 of $2.96 per gallon, up from the $2.82 per gallon it expects for the current year.

While inventories of distillate — used for diesel as well as home heating oil — are expected to decline, EIA expects them to remain within the normal range, even if the the winter is slightly colder than projected. A bigger risk for distillate inventories than winter is competition with gasoline, EIA suggests. Gasoline inventories are tight, so if refiners produce more gasoline than expected over the next several months in order to rebuild inventories, the result could be lower distillate supplies, EIA said.

For EIA’s Short-Term Energy and Winter Fuels Outlook, click here.