WASHINGTON - Current optimism regarding economic recovery is driving oil prices higher, despite high inventories, according to the U.S. Department of Energy’s (DOE’s) Energy Information Administration (EIA).

In the EIA’s latest Short-Term Energy Outlook, its forecast for the average price of oil during the winter heating season is now $77 per barrel of oil, up from a $70 forecast a month ago. Assuming that U.S. and world economic conditions continue to improve, the EIA is forecasting that oil will reach a monthly average of $81 per barrel by December 2010. The EIA also notes that should the economic recovery stall, oil prices will likely weaken. The report says that sustained economic growth in China and other Asian countries is already beginning to cause a rebound in world oil consumption.

In general, gasoline and diesel fuel prices follow oil prices, and the current trends are no exception. The EIA expects regular grade gasoline prices in the U.S. to average $2.66 per gallon in the fourth quarter of 2009, up from the average price of $2.55 per gallon in September and October. Gasoline is expected to average $2.81 per gallon in 2010. Meanwhile, diesel fuel averaged $2.63 per gallon in August and September and is expected to escalate in price, averaging $2.79 per gallon during the fourth quarter of 2009 and rising to $2.94 per gallon in 2010.

Publication date: 11/16/2009