Gas Prices Set Record, Oil Moves Higher

By: AP
By: AP

NEW YORK (AP) -- Gas and diesel pump prices jumped to yet another record Friday, piling on the costs for motorists as well as consumers reliant on trucks, trains and ships that deliver goods to market.

Retail gasoline rose 0.8 cents to a national average of $3.365 a gallon, although drivers in California could expect to pay nearly 30 cents more for regular and over $4 a gallon for higher grades, according to AAA and the Oil Price Information Service.

The increase marks the latest in a series of retail gasoline records in recent weeks, and leaves drivers paying 56 cents more a gallon now than they did a year ago. And there may be more to come.

"We do think prices, particularly for self-serve regular, are going to continue to go up," AAA fuel price analyst Geoff Sundstrom said.

Oil prices also edged higher in a late-day push, but remained more than $2 below an all-time high set earlier in the week. Light, sweet crude for May delivery rose 3 cents to settle at $110.14 on the New York Mercantile Exchange.

Analysts expect gasoline prices will continue to set records as more drivers take to the roads as summer approaches and refineries complete their conversion to more expensive summer-grade fuel. It is unclear how high prices will go, however, because a bigger fuel bill could convince some drivers to cut back.

"I still do not believe there's enough strength in demand that it's going to justify that move to $4 a gallon" nationwide, said Tom Kloza of the Oil Price Information Service in Wall, N.J.

Retail diesel prices rose 2.1 cents to $4.066, topping the previous high set a day earlier. The spike in the key transportation fuel is significant because it affects the cost of a wide range of goods - meaning that even Americans who don't drive will feel the pinch.

"Its obviously a very distressing situation for the commercial transportation sector," Sundstrom said.

An unexpected decline in U.S. crude and gasoline inventories drove oil prices to a trading record of $112.21 a barrel on Wednesday amid concerns about inadequate supplies. Prices fell Thursday.

Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., said the tepid performance later in the week was the result of traders looking to lock in their gains before the weekend.

"The main thing I see is just profit-taking after we ran things up to a record high," he said. "There's a strong possibility we'll see new record highs again next week."

Crude prices were under pressure for most of Friday after the International Energy Agency lowered its global oil demand forecast for the year by 310,000 barrels a day to 87.2 million barrels a day, citing lower economic output expectations in the U.S. and elsewhere.

"The suspicion is it's not just the U.S. that's going to see a slowdown," Kloza said. "I think it's significant, but I also think the would-be sellers ... are probably not yet convinced."

The U.S. dollar strengthened against the euro and the pound, which also helped keep crude prices from overheating further.

Crude oil's recent run has been largely attributed to the steadily depreciating U.S. currency. A weakening dollar attracts investors to commodities as a hedge against inflation, but when the dollar rises, the effect tends to reverse as oil also becomes more expensive to investors overseas.

In other Nymex trading Friday, heating oil futures rose 0.35 cent to settle at $3.1975 a gallon, while gasoline futures rose by 1.52 cents to settle at $2.8073 a gallon. Natural gas futures slipped by 19.7 cents to settle at $9.901 per 1,000 cubic feet.

In London, Brent crude futures rose 55 cents to settle at $108.75 a barrel on the ICE Futures exchange.

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