NEW YORK - Just in time for the start of the summer driving season: Oil near $130 a barrel and gas up nearly 20 percent over last year. It may be worth packing some extra cash along with the picnic supplies this Memorial Day weekend.
Crude prices spiked to a yet another trading high Tuesday as supply concerns mounted and traders poured in for a last-minute buying binge. At filling stations across the country, the national average price for a gallon of regular gasoline approached $4, touching $3.80 for the first time.
The June contract for light, sweet crude traded as high as $129.60 on the New York Mercantile Exchange before settling at $129.07, up $2.02 from Monday's record high. The imminent expiration of that contract, which ended with the close of Tuesday's trading, created additional volatility in the market.
"I keep making projections, and they keep turning out to be too low, especially in the crude market," said Darin Newsom, senior analyst at market analysis provider DTN. "We're already pushing up against $130. If we clear that, there's no reason to believe crude oil can't get to $140."
Oil's march to new highs coincided with the Labor Department's report of an unexpectedly sharp rise in wholesale inflation last month. The combination raised fears that inflation will slice into Americans' discretionary spending, and that sent stocks falling sharply on Wall Street.
Retail fuel prices also continued to shatter records, pressuring drivers looking forward to road trips this weekend. The national average price for a gallon of regular gasoline is now $3.80 on the nose, according to AAA and the Oil Price Information Service, meaning gas prices are up about 19 percent from this time last year.
Diesel jumped nearly 2 cents overnight to a record $4.54 a gallon.
Oil futures are now selling for about twice what they were just a year ago. Prices have been propelled by a number of factors, including worries about insufficient supply, soaring global demand and a sliding dollar that has made oil cheaper for some buyers overseas. Speculative buying has also helped push prices higher, analysts say.
Industry observers in recent days have also pointed to especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power. The country also seems to be ramping up diesel imports ahead of the Olympic games, analysts say, driving up prices.
"It's turning into a more defined demand for diesel fuel ahead of the Olympics," said Jim Ritterbusch, president of oil trading advisory firm Ritterbusch & Associates in Galena, Ill. "They appear to stockpiling."
DTN's Newsom said that trend is likely to continue at least through the beginning of the games, which run from Aug. 8 to 24.
"China going into the Summer Olympics is putting its best face forward. They're going to continue to bring in diesel for their power plants are going to have plenty on hand," Newsom said. "What's going to happen after that, we don't know."
Crude's latest surge comes after OPEC's president reportedly said the cartel won't increase its output before its next meeting in September, adding to concerns about global supply.
The contract reached a new closing high of $127.05 Monday after Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, was quoted by a government newspaper as saying OPEC won't increase its output before its next meeting on Sept. 9.
The front-month crude contract has hit trading or closing records — if not both — in 10 of the last 12 sessions.
The rally has helped drag the price of refined fuels higher as well. Futures for heating oil, which is used as a proxy for the price of diesel, and gasoline both set new records Tuesday.
Heating oil futures jumped almost a dime to settle at $3.775 a gallon, after earlier jumping to a record $3.792, while gasoline futures added 6.78 cents to settle at $3.3044 a gallon, just short of the intraday high of $3.3085. In other Nymex trading, natural gas futures jumped 39.1 cents to $11.345 per 1,000 cubic feet.
In London, Brent crude for July delivery added $2.39 to $127.45 on the ICE Futures Exchange.