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Diesel fuel will average $4.18 a gallon this year and $4.27 in 2009, the Department of Energy said Tuesday.

The increase in price from last year’s $2.77 average — though lower than the recent weeks’ prices, which topped out at $4.764 on July 14 — reflect higher diesel demand, particularly in emerging markets, DOE said in its monthly short-term energy outlook.

Oil priceswill average $119 this year after averaging $72 a barrel in 2007, and climb to an average $124 next year, DOE said. Oil closed under $115 Monday after closing at a record $145.18 on July 14.

Gasoline’s average this year will be $3.65 a gallon — up from last year’s $2.81 average but below this week’s $3.809 weekly surveyed price, and about 50 cents under the $4.114 record set four weeks ago.

Gas prices are expected to continue falling slowly, averaging just less than $3.80 per gallon over the next few months, reflecting continuing weak gasoline margins because of the decline in gasoline consumption and growth in ethanol supply, DOE said.