Gov't Expects Higher Oil, Gas Prices

WASHINGTON (AP) -- The government's latest energy forecast calls for higher oil and slightly higher retail gasoline prices for the rest of the year.

In its short-term energy outlook released Tuesday, the Energy Department's Energy Information Administration forecast crude oil will average $80 a barrel in the second half of the year and $85 a barrel by the end of 2011. That's up slightly from an average oil price of $76.32 a barrel in July.

The agency attributed rising prices to an expected increase in oil demand due to a global economic recovery. At the same time, it said there would be a gradual reduction in global oil inventories.

EIA expects retail gasoline prices to average $2.77 per gallon through 2010, up about 1 cent per gallon from the first six months of the year. Gasoline prices averaged $2.35 a gallon in 2009.

EIA said domestic crude oil production should increase by 110,000 barrels a day to 5.43 million barrels a day this year.

The agency also said a six-month government moratorium on exploratory deepwater drilling likely will lead to an average reduction of 82,000 barrels a day in Gulf of Mexico production.

EIA expects overall crude production to increase by 30,000 barrels a day to 5.46 million barrels a day in 2011.

The moratorium was imposed following the explosion and sinking of a BP PLC well on April 20, which sent millions of gallons of oil into the Gulf. BP has stopped the flow temporarily and is working to install a permanent plug.

EIA said natural gas prices this year should average about $4.69 per million BTU, an increase of 74 cents per million BTU over the 2009 average price. It forecast an average price of $4.98 per million BTU in 2011.

EIA expects residential electricity prices to average 11.6 cents per kilowatt-hour in 2010, compared with 11.5 cents in 2009.

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