The EIA (Energy Information Administration), the statistical arm of the US Department of Energy, has suddenly changed its mind about what most energy prices will do across the years 2008 and 2009, and it’s not happy news.

The data below is from the STEO (Short Term Energy Outlook), which the EIA issues around the first week of each month. The home page for the STEO is here, while the archive of prior versions is here.

So, what do the numbers say?

First up is everyone’s favorite, oil:

In the May 2008 release, the EIA projected that crude oil would average $103.36/barrel in 2008, and then decline to $97.62/barrel in 2009.

But in the June release, which was posted yesterday, they upped their estimate for 2008 to $122.15/barrel (quite a jump from that $103 value in May, but not too surprising in light of the current $135+ price). Even more surprising is that they’re now projecting oil to average $126.00 in 2009, almost $4/barrel higher than in 2008.

From May to June, the projection for the 2008 average price rose 18.2%, and the projection for 2009 rose by 29.1%. The projected change from 2008 to 2009 went from a decline in the May report to an increase in the June report.

Gasoline (regular unleaded, retail price):

May: $3.52/gallon in 2008 declining to $3.44 in 2009

June: $3.78 in 2008 rising to $3.92 in 2009

From May to June, the projection for the 2008 average price rose 7.4%, and the projection for 2009 rose by 14.0%. The projected change from 2008 to 2009 went from a decline to an increase.

Diesel fuel (retail price):

May: $3.94/gallon in 2008 declining to $3.67 in 2009

June: $4.32 in 2008 and 2009

From May to June, the projection for the 2008 average price rose 9.6%, and the projection for 2009 rose by 17.7%. The projected change from 2008 to 2009 went from a decline to no change.

Natural gas (US average wellhead price):

May: $8.64/thousand cubic feet in 2008 declining to $8.52 in 2009

June: $9.82 in 2008 rising to $9.96 in 2009

From May to June, the projection for the 2008 average price rose 13.7%, and the projection for 2009 rose by 16.9%. The projected change from 2008 to 2009 went from a decline to an increase.

(Note that this is not the retail price of natural gas; that price is much higher, and is projected by the EIA to be about $15 for residential customers in 2008 and $17 in 2009, both very high numbers by historical standards.)

Coal:

May: $1.87/per million Btu in 2008 rising to $1.91 in 2009

June: $1.89 in 2008 rising to $1.96 in 2009

From May to June, the projection for the 2008 average price rose 1.1%, and the projection for 2009 rose by 2.6%. The projected change from 2008 to 2009 was an increase in both months.

Conclusions

First and foremost, don’t go nuts over price projections from the EIA or anyone else. As I so often point out here, the energy field is littered with predictions that didn’t exactly hit the mark. The EIA seems to have a particularly inaccurate dart board. That’s not to say that I think this revision of their numbers is wrong; if anything I think it’s conservative and overdue. In fact, it’s hard to look at this flip in projections–from generally downward (2008 to 2009) to generally upward–and not leap to the ever so slightly tin-foil-hatted conclusion that the EIA held out as long as they could before delivering the bad news. A month ago they were predicting an average price for oil in 2008 of only $103.36, for example. In those intervening four months did they suddenly notice (as they say in the STEO release for June):

The combination of rising consumption, further downward revisions in the supply outlook for countries outside of the Organization of the Petroleum Exporting Countries (OPEC), and low surplus production capacity reinforce the perception that supply is having a difficult time keeping up with demand growth, accounting for much of the upward trend in oil prices. Consumption in countries outside of the Organization for Economic Cooperation and Development (OECD) continues to grow rapidly, offsetting weaker consumption in OECD countries, especially the United States. Declining production in a number of non-OPEC nations, including Mexico, United Kingdom, and Norway, is largely offsetting increases in other countries. Slow growth in non-OPEC supply is coinciding with disruptions in supplies from some OPEC countries, such as Nigeria. Ongoing geopolitical concerns in several producing countries, including Venezuela and Iran, have contributed to oil price volatility.

The market remains concerned that the cushion of surplus production capacity of less than 2 million bbl/d (almost all located in Saudi Arabia) and/or stocks is insufficient to protect against possible changes in supply or consumption, especially as we enter the summer hurricane season. The absence of a Saudi commitment to add capacity beyond its current goal of 12.5 million bbl/d adds to the uncertainty about the adequacy of future supply capacity growth.

See the June STEO for the other stunning revelations behind these latest projections, revelations that absolutely no one (by which I mean practically everyone on the planet) has been talking about for a long time.

Combine this report, which I’m sure has a huge influence on commodity traders, with the big drop in US oil stockpiles released in today’s TWIP report (likewise), and you probably have all the explanation you need for why oil is up $6.29/barrel and gasoline is up over 17 cents/gallon on the NYMEX as I type this.