WASHINGTON - Crude oil prices are projected to steadily increase over the next two years and will average $99 per barrel in the fourth quarter of 2012, according to the U.S. Department of Energy’s (DOE’s) Energy Information Administration (EIA).

The EIA’s Short-Term Energy Outlook projects a continued tightening of world oil markets over the next two years, with consumption growing by an annual average of 1.5 million barrels per day. At the same time, growth in supply from countries that are not members of the Organization of Petroleum Exporting Countries (OPEC) will average less than 0.1 million barrels per day each year. The EIA expects oil markets to rely on OPEC production increases and to draw down inventories to fill the demand gap. As a result, crude oil is expected to average $93 per barrel in 2011 and $98 per barrel in 2012, although these figures depend heavily on the rate of economic growth and on the magnitude of OPEC production increases. Crude oil spot prices averaged more than $89 per barrel in December 2010, about $5 per barrel higher than the November average.

In the United States, the primary impact of increasing crude oil prices will be on the price of motor fuels. The EIA expects retail prices for regular-grade gasoline to rise from an average of $2.78 per gallon in 2010 to $3.17 per gallon in 2011 and $3.29 per gallon in 2012. Likewise, retail prices for on-highway diesel fuel will rise from $2.99 per gallon in 2010 to $3.40 per gallon in 2011 and $3.52 per gallon in 2012. But because of increased demand, summer prices tend to rise above the average, so the EIA is anticipating that this year’s peak monthly average price for gasoline will be reached in July, when it is projected to crest at $3.27 per gallon. However, the EIA estimates a 7 percent chance that the retail price of gasoline will exceed $4 per gallon in July.

Publication date: 01/31/2011