Government predicts rise in diesel, gasoline prices

| Tuesday, April 11, 2006

The Energy Information Agency released its short-term energy outlook for the summer on Tuesday, April 11, and the prognosis isn’t good.

As if they weren’t high enough already, both diesel and gasoline prices are expected to stay high heading into the summer.

Both are expected to average $2.62 per gallon, though diesel already surpassed that average by 2 cents for the week ending April 10.

Last year’s average for diesel during the summer months of April through September was $2.59 per gallon, according to the EIA report.

The report cited increased world oil consumption along with new federal requirements for both diesel and gasoline as the primary forces behind the increases.

The report said the transition to ultra low-sulfur diesel is “possibly the most difficult fuel specification transition the refining industry has had to make so far” and said that the transition will result in “increased production costs and distribution complexity.”

Supplies of ultra low-sulfur diesel are another concern. The report said it may be difficult to obtain imports of ULSD, which could cause localized price spikes in the event of a domestic supply disruption like last year’s hurricanes.

This, combined with increased growth in demand for diesel from China and Europe, is expected to keep diesel prices high this year. Diesel fuel consumption is also expected to increase by about 3.2 percent over last summer, the report said.

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