Gasoline and diesel fuel prices have been falling slowly since July 14, and the U.S. Department of Energy’s (DOE’s) Energy Information Administration (EIA) expects that trend to continue over the next few months, but the longer-term outlook is for increased fuel prices.

The EIA’s Short-Term Energy Outlook notes that gasoline and diesel fuel prices are following the trend in crude oil prices, which peaked at $145 per barrel on July 3 before sliding to less than $120 per barrel by early August. For the year as a whole, the EIA expects crude oil prices to average $119 per barrel, but next year, crude oil prices will reach a higher average price of $124 per barrel. Likewise, regular-grade gasoline and diesel fuel prices will average $3.65 per gallon and $4.18 per gallon this year, respectively, but will rise to an average of $3.82 per gallon and $4.27 per gallon in 2009.

With some relief for the cost of driving and fall approaching, it’s time to start looking at the cost of heating homes this winter. The good news is that a massive increase in domestic natural gas production has stopped the march toward higher prices, with the spot price in July averaging $11.45 per thousand cubic feet (Mcf) of natural gas, down $1.62 per Mcf from June’s average price. The EIA now projects average spot prices of $10 per Mcf in 2008 and $9 per Mcf in 2009.

But this still translates to average residential natural gas prices of $15.58 per Mcf this winter, a 22 percent increase over last winter’s average price. The news is even worse for those using fuel oil for heating, with a projected average price of $4.34 per gallon, a 31 percent increase over last year’s average price. Electricity prices are also on the increase, with a projected 5 percent increase in 2008 and a 10 percent increase in 2009.