The Energy Information Administration revised sharply higher its price expectations for retail gasoline and diesel fuels from its previous assessment in May, with the updated forecast sparked by a rallying oil market amid sentiment that the economy is recovering and demand for fuel will increase as a result.

"Oil prices rose for the third consecutive month in May, driven in part by expectations of a global economic recovery and future increases in oil consumption," the agency said. "In addition, a weaker dollar and increasing financial market activity are prompting higher prices for commodities, overshadowing weak oil supply and demand fundamentals."

Publishing the information in its Short-term Energy Outlook for June released last week, the EIA adjusted higher by 21cts its forecast for what retail gasoline will average in 2009 to $2.33 gal. The agency expects a monthly summer seasonal peak in July that averages near $2.70 gal.

The Environmental Protection Agency heard criticism from a wide variety of interest groups that would be affected by the agency’s proposed 2010 Renewable Fuels Standards (RFS2), which includes tougher regulations that many commentators said would put undue financial pressure on stakeholders, or nullify investment for fledgling alternative-fuel projects.

The EPA is the administrator ensuring compliance with the Energy Independence and Security Act of 2007’s requirement that 36 billion gallons of renewable fuels be blended into the nation’s fuel supply by 2022.

The law includes consideration of the impact on indirect land use and life cycle assessments of renewable fuels in meeting the RFS, with the interpretation by the EPA in its proposal including regulations that some interested parties said are too stringent and not fully based on scientific fact.