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Heating costs likely to drop

The Energy Department said it expected demand to fall again this winter, the second year in a row.

WASHINGTON - The government yesterday lowered its projections for winter heating costs again because of the dramatic drop in crude-oil demand and prices.

The Energy Department said that, because of the worldwide economic slowdown, it expected global crude-oil consumption to decline 450,000 barrels a day next year, the first time in three decades that global oil demand would fall for two years in a row. U.S. oil demand, which declined 5.8 percent this year, also was expected to continue to go down.

The plunge in demand will keep crude-oil prices in check through 2009, said the report by the department's Energy Information Administration.

Crude-oil prices are expected to average $51 a barrel next year, nearly a third of the cost when oil peaked at $145 a barrel last summer. Oil prices are likely to remain relatively low despite production declines. Prices hovered just above $43 a barrel yesterday on the New York Mercantile Exchange.

The energy agency said that the Organization of Petroleum Exporting Countries was likely to pump 1.6 million fewer barrels a day in 2009 than it did this year, but that the decline would be partially offset by an expected increase of 410,000 barrels a day from non-OPEC producers.

The OPEC countries are scheduled to meet next Wednesday to decide on production targets.

The U.S. report confirmed that because of the economic slowdown - and high prices during much of the year - Americans were using less oil. It said U.S. petroleum consumption dropped 1.2 million barrels a day in 2008 to 19.5 million barrels a day, a 5.8 percent decline from 2007.

That has had an effect on retail energy prices, the agency report showed.

The energy agency projects that gasoline costs would average $2.03 a gallon next year and diesel $2.47 a gallon. The price of both gasoline and diesel has dropped about $2 a gallon since mid-July to a national average this week of $1.70 a gallon for gasoline and $2.52 a gallon for diesel.

Fuel oil for heating this winter will be nearly 20 percent less than last winter - at $2.53 a gallon. While demand is expected to rise slightly because of colder weather, households are expected to pay on average $1,570 this heating season, or $383 less than last winter.