NEW YORK—Oil prices should average $105 a barrel in 2011, the U.S. Department of Energy said, raising its forecast for this year due to the disruption of crude exports from Libya.
The DOE also said there is a 25% chance that gasoline prices would average $4 a gallon or more during the summer driving season.
The DOE's Energy Information Administration last month said it expected the price of oil—West Texas Intermediate as well as other crudes—to average $91 a barrel in 2011. That was before a wave of popular unrest swept the Arab world, deposing Egyptian President Hosni Mubarak and threatening the rule of Libyan dictator Moammar Gadhafi.
"Continuing unrest in Libya as well as other North African and Middle Eastern countries has led to the highest crude oil prices since 2008," the EIA said in its monthly Short-Term Energy Outlook. The EIA said it expects crude prices to continue rising in 2012, averaging $106 a barrel.
West Texas Intermediate crude, the main oil contract traded on the New York Mercantile Exchange and the primary price benchmark used in the U.S., will cost an average of $102 a barrel this year, the EIA said, raising its forecast by $9 a barrel. In 2012, WTI will average $104 a barrel.
WTI is expected to remain cheaper than other crudes due to the glut of crude at the Nymex delivery point of Cushing, Okla.
On Tuesday afternoon, WTI for April delivery on the Nymex was down 65 cents at $104.80 a barrel. Brent crude on the ICE futures exchange fell $1.86 to $113.18 a barrel.
The prices of both contracts have soared over the last month due to supply disruptions caused by the revolt in Libya. The International Energy Agency has estimated as much as one million barrels a day of Libyan crude supply has been lost.
The higher price of oil should lead to higher pump prices for consumers, the EIA said. The agency said it now expects regular-grade motor gasoline to average $3.56 a gallon this year, up 41 cents from the previous forecast and up 77 cents from the 2010 average. During the peak summer driving season, gasoline prices should average about $3.70 a gallon, the EIA said.
The EIA cautioned there is "significant uncertainty surrounding this forecast," adding it expects a 25% chance that the average monthly gasoline prices will breach the psychologically significant $4-a-gallon threshold this summer.
"Rising crude oil prices are the primary reason for higher retail prices, but higher refining margins are also expected to be a contributing factor," the EIA said.
April gasoline futures on the Nymex were down 5.64 cents at $2.9475 a gallon.