U.S. benchmark crude oil prices are expected to average over $100 a barrel in 2012 and touch an all-time high amid rising demand as global economies grow, signaling continuing high energy costs for farmers already squeezed by increasingly expensive fuel.
West Texas Intermediate crude is forecast to average $100.25 a barrel this year, up 5.7 percent from an average of $94.86 in 2011, the Energy Department said in its monthly short-term outlook Jan. 10. The 2012 estimate was revised up by 2.3 percent from the department’s projection a month ago, and would be a record high not adjusting for inflation.
Brazil, China and the Middle East are expected to lead growth in global petroleum consumption over the next two years, though economic downturns in the U.S. and Europe could send oil prices lower, the Energy Department said. Additionally, any supply disruptions in key producing regions could spike oil prices higher, the department said, citing last year’s conflict in Libya.
“There are many significant uncertainties that could push oil prices higher or lower,” the department said in the report. With another supply disruption, “oil prices could be significantly higher,” the department said.
Expensive oil rippled through the food chain over the past few years, boosting costs to plant and harvest crops and truck livestock and contributing to accelerating supermarket inflation. While gasoline and diesel costs at the pump this year are expected to be similar to last year, based on Energy Department estimates, prices are still historically high.
Retail diesel will average about $3.85 a gallon in 2012, up 1 cent from 2011 and a record high not taking inflation into account, according to the department’s forecast. In 2008, diesel averaged a record $4.01 a gallon in 2012 dollars.
Based on the Energy Department’s projected 2012 average, it will cost an Illinois farmer nearly $1,040 to fill the 270-gallon tank on a Case IH 9370 tractor with diesel, according to the American Farm Bureau Federation. That’s up 43 percent from $726 in 2010 and up 77 percent from $588 in 2009.
Regular-grade gasoline will average an estimated $3.48 a gallon nationwide in 2012, down 5 cents from 2011, the Energy Department said. Crude accounts for about 65 percent of the cost of producing gasoline, with the rest reflecting refining, distribution, marketing and taxes, according to the Energy Department.
When inflation is taken into account, oil prices in 2012 are expected to fall short of the record set during a price spike in 2008. That year, oil averaged about $105 a barrel in 2012 dollars, according to the Energy Department.