NEW YORK (AP) -- The rally in energy prices gained momentum Friday, with retail gas prices rising further into record territory and diesel and heating oil futures setting records of their own amid concerns about strong global demand and tight supplies.
Crude oil prices fell modestly as a sharp downturn in the stock market and worries about the economy prompted some profit-taking. But with the Federal Reserve expected to cut interest rates again next week, analysts expect the dollar to weaken further, propelling crude to new records.
At the pump, gas prices set records for the fourth straight day, rising 1.3 cents Friday to a national average price of $3.28 a gallon, according to AAA and the Oil Price Information Service. Average prices are nearing $4 in some parts of Hawaii.
Diesel, meanwhile, rose 2.9 cents to a new record national average of $3.938 a gallon. Heating oil, a fellow distillate and close cousin of diesel, jumped to new records on the New York Mercantile Exchange.
Diesel, used by trucks, trains and ships, is used to move the vast majority of the world's goods. While the U.S. economy appears to be slowing, the global economy continues to grow.
"Demand for diesel worldwide has been incredible," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.
April heating oil futures rose 2.17 cents to settle at a record $3.1465 a gallon after earlier setting a new trading record of $3.222 a gallon.
Oil prices fell for a change Friday, following stocks lower after Bear Stearns Cos. acknowledged serious financial problems, and the Federal Reserve and JPMorgan Chase & Co. bailed the investment bank out.
Light, sweet crude for April delivery fell 12 cents to settle at $110.21 on the Nymex Friday after rising earlier to within pennies of its latest trading record of $111, set Thursday. It was oil's first decline in a week. Futures rose $5.60, or 5 percent, this week.
Despite the respite, analysts see little on the horizon to change the upward pressure on oil prices, which have set new records for seven straight sessions, and have risen nearly 12 percent since last week.
Analysts blame the weak dollar, which set a new low against the euro on Friday, for oil's recent rally. Crude futures and offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak. Interest rate cuts further weaken the dollar and have helped drive oil's rise.
Another reduction in benchmark lending rates is expected at the Fed's regularly scheduled monetary policy meeting on Tuesday. The Labor Department's report Friday that consumer prices were unchanged last month - a sign inflation remains low - appeared to clear the way for a substantial interest rate cut.
"We still have this link to the dollar, and that's not going to go away at any point," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
That means pain at the pump will continue for American consumers. The Energy Department expects gas prices to rise to near $3.50 a gallon this spring, while some analysts say prices could peak as high as $3.75 or even $4 a gallon.
Diesel, which is a big part of the reason prices of food and consumer goods are on the rise, is likely to breach the $4 a gallon level soon.
High fuel prices are sure to cut demand at some point, analysts say. Demand for gasoline has fallen nationwide every week since late January. However, diesel may be more immune from price pressure than gas, analysts say.
Analysts gas and diesel prices will eventually fall, but believe the decline may come only after high prices have pushed the economy into a severe slowdown.
"This is a bubble, and everyone is waiting for it to pop," Flynn said.
In other Nymex trading Friday, April gasoline futures rose 0.66 cent to settle at $2.6894 a gallon, and April natural gas futures fell 36.2 cents to settle at $9.868 per 1,000 cubic feet.