The average price for diesel fuel in the U.S. declined another nickel per gallon this week – 5.2 cents per gallon to be precise, according to the Energy Information Administration (EIA) – and expectations are for more of the same due to a weakening outlook for the global economy.
The EIA said average diesel fuel prices in the U.S. fell to $3.729 per gallon this week, down from $3.781 per gallon last week and $3.846 per gallon during the week of June 4. Diesel is now 22.1 cents cheaper per gallon compared to the same time period in 2011, the agency noted.
Diesel prices dropped in every region of the country this week, the EIA noted, and is now cheapest along the Gulf Coast ($3.654 per gallon) followed by the Midwest ($3.655), Lower Atlantic ($3.66) and East Coast ($3.766). Diesel remains unsurprisingly the most expensive in California ($3.966 per gallon) followed by New England ($3.923), according to EIA’s data.
The average price of gasoline in the U.S. also remains on the downswing, the agency said, dropping 3.9 cents this week to $3.533 per gallon, compared to $3.572 per gallon last week and $3.613 per gallon during the week of June 4. Gasoline is now 11.9 cents per gallon cheaper versus the same period in 2011, EIA pointed out.
The Midwest is the only region in the country that witnessed a week-over-week increase in gasoline costs, with prices rising 2 cents per gallon. Gasoline is cheapest this week along the Gulf Coast ($3.267 per gallon), the Lower Atlantic ($3.301) and East Coast ($3.402), while it’s the most expensive along the West Coast ($3.964) and in the Rocky Mountain region ($3.69) – places where gasoline remains costlier even in comparison to the same time period last year, by 11.5 and 6.6 cents per gallon, respectively.
However, EIA believes gasoline should keep falling – lowering its average retail price forecast for regular-grade gasoline for April-through-September summer driving season to $3.60 per gallon from the $3.79 per gallon prediction it made last month. The agency also expects retail prices for regular-grade gasoline to now average $3.56 per gallon in 2012 and $3.51 per gallon in 2013, running fairly close to the $3.53 per gallon average compiled for 2011.
The reason for the fuel price downswing remains fairly simple, the agency noted in its more recent Short Term Energy Outlook: global oil prices are now down sharply, off nearly $20 compared to earlier in the year, and that drop is expected to be sustained as economic growth prospects continue to dim for much of the world.
EIA pointed out that while West Texas Intermediate (WTI) crude oil spot prices averaged more than $100 per barrel over the first four months of 2012, prices plummeted to $83 per barrel by June 1 from $106 per barrel on May 1 – a reflection of what the agency terms “market concerns about world economic and oil demand growth.”
EIA now projects the price of WTI crude oil to average about $95 per barrel over the second half of 2012, with U.S. refiner acquisition cost of crude to average $100 per barrel – both almost $11 per barrel lower than the forecast it issued just last month.
The agency also now expects crude oil prices to remain relatively flat in 2013, with this forecast resting on the assumption that U.S. real gross domestic product (GDP) grows only by 2.2% this year and 2.4 percent in 2013r, while world oil-consumption-weighted real GDP grows by 3.1% and 3.5% in 2012 and 2013, respectively.
“The recent economic and financial news that points towards weaker economic outlooks could lead to lower economic growth forecasts and further downward revisions to our crude oil price forecasts,” EIA stressed in its June energy outlook report.