The nearly non-existent growth in the economy has been pushing gas and diesel prices in both directions in recent weeks, leading the U.S. Energy Information Administration (EIA) to adjust its projections for fuel prices heading into 2012. How much, though, remains at the mercy of the economic recovery.

On a retail basis, EIA is predicting on-highway diesel fuel will finish 2011 averaging $3.80/gal. and then average $3.73/gal. in 2012.

In its latest Short Term Energy and Winter Fuels Outlook released last month, EIA is predicting a barrel of crude will average $98 in 2012 compared to $99 this year and down from a previous projection of $103 per barrel in 2012.

As it prepared the latest Outlook report, EIA said that the supply of global crude oil and liquid fuels has increased in 2011, “resulting in some easing of oil market tightness. Despite this easing, EIA continues to expect markets to rely on inventories to meet some consumption growth in 2011 and 2012.”

The group is predicting U.S. real gross domestic product (GDP) growth of 1.8% next year, also down slightly from previous forecasts. And it's that economic growth, EIA noted, that continues to put downward pressure on oil prices, offsetting supply uncertainties.

“Downside demand risks predominate as fears persist about the rate of global economic recovery, contagion effects of the debt crisis in the European Union, and other fiscal issues facing national governments,” EIA said. “On the supply side, there may be downward price pressure if Libya is able to ramp up oil production and exports sooner than anticipated.”

“The main factor to watch in the next few months is just how much Libyan crude comes back on the market, and whether other producers need to make way for it,” said John Kingston, of research firm Platts, in a recent report. “Long term, there's one thing to note: There are a few examples of oil exporting countries that have gone through enormous change recently — Iran, Iraq, Nigeria and Venezuela — and had their production return to pre-turmoil levels. Libya would be challenging the odds to get back to its original 1.6-million-barrel per day production level.”

EIA expects global consumption to continue growing, reaching 89.8 million barrels per day in 2012, up from 88.4 this year, mainly due to increased use in China.

Even with all the supply uncertainties that exist, it is the economic recovery that will likely play the largest role in determining future retail diesel fuel prices.

According to the latest Ceridian-UCLA Pulse of Commerce Index (PCI), the U.S. economy declined for the third consecutive month, falling 1% in September after 1.4% and 0.2% declines in August and July. For the three months ending September, the PCI declined 4.3%.

Because the PCI uses real-time diesel fuel purchases for its calculations, it is considered a reliable barometer for the economy.

“With the continued weakness in September, the PCI-based forecast for third-quarter GDP growth is zero,” said Ed Leamer, chief economist for the PCI. “Businesses appear to be unwilling to restock for a potentially vibrant holiday season; at the same time, they are planning to ramp up inventories late this year, if and when the sales start to materialize.”

If that happens, then EIA may be adjusting its price forecasts upward yet again.