U.S. Gas Prices Kick Into Overdrive

Surging Price Of Crude Oil, Expected Gasoline Shortages Spur Latest Increase

(CBS/AP)  Gas prices rose further into record territory Monday, pulled higher by resurgent oil futures and a growing belief that gasoline supplies are falling as the summer driving season approaches.

Oil futures, meanwhile, jumped by more than $2 a barrel as traders bet the Federal Reserve will continue cutting interest rates. Comments from OPEC suggesting the cartel plans no production increases also boosted oil prices.

At the pump, the national average price of a gallon of gas jumped 3.6 cents over the weekend to a record $3.339, according to AAA and the Oil Price Information Service. That's 58 cents higher than a year ago. In New York Mercantile Exchange trading, May gasoline futures rose 3.56 cents to $2.7923 a gallon.

The Energy Department expects retail gas prices to peak above $3.60 a gallon later in the spring, said Guy Caruso, head of the department's Energy Information Administration, according to Dow Jones Newswires. Many analysts see prices peaking closer to $4 a gallon.

Gas prices are following crude futures higher, but they're also rising on concerns about supplies and demand. Analysts say refiners have cut back on gasoline production due to low profit margins; the rising price of crude means it costs them more to refine gas.

And last week, the Energy Information Administration said gasoline inventories fell more than expected during the week ended March 28. Gasoline demand rose for the first time since January, raising the prospect that supplies will fall further as Americans drive more during the spring and summer.

"It's very normal that you see the ratcheting up of (gasoline prices) before its season," said Stephen Schork, an energy trader and analyst in Villanova, Pa.

Despite last week's increase, Caruso expects demand for gasoline to fall by 85,000 barrels a day this summer compared to last due to high prices and the weak economy, Dow Jones reported. That would be the first summertime decline in gasoline demand since 1991.

To date, however, falling demand has failed to deflate surging gas prices, which are putting more pressure on consumers already suffering from higher food prices, falling home values and a tight job market. One of the factors pushing food prices higher is diesel fuel, which is used to transport most of the world's food, industrial and consumer goods. Diesel prices, while holding above $4 a gallon, have retreated lately, and fell 1.5 cents overnight to a national average of $4.007.

In oil trading Monday, May futures rose $2.89 to $109.12 a barrel on the Nymex as traders shrugged off a slightly weaker dollar and bet that future Fed rate cuts will weaken the greenback. A weak dollar attracts investors to hard commodities such as oil, which are seen as a hedge against inflation. Also, a falling dollar makes oil cheaper to investors overseas.

The prospect that the Organization of Petroleum Exporting Countries will hold production steady this year also pushed oil prices higher Monday.

"OPEC's Secretary-General, Abdullah al-Badri, made it clear over the weekend that the cartel continues to believe that the world is sufficiently supplied with oil and ... has no plans to increase output any time soon," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn., in a research note.

Oil futures are nearing last month's trading record of $111.80 a barrel after a swoon that twice brought them briefly below $100.

In other Nymex trading Monday, May heating oil futures rose 9.58 cents to $3.0879 a gallon while May natural gas futures rose 49.6 cents to $9.818 per 1,000 cubic feet. Analysts said heating oil and natural gas futures were boosted by forecasts for cooler weather over the next two weeks.

In London, May Brent crude rose $2.29 to $107.19 a barrel on the ICE Futures Exchange.

[payasyougo]

The president should...

1.) stop the winter/summer gasoline formulas, which have no proven benefit. This would fix the refinery excuses for high prices.

Smog in the city is due to stop and go traffic resulting in numerous accelerations, each of which generates more emissions than several miles of constant speed. This is a traffic quantity/management problem that can''''t be solved by magic fuel formulas.

2.) mandate 55mph maximum speed limit for about 6 months. This saves on average 15%. This would reduce consumption thus bulding up inventories and eliminate that excuse for high prices.

Watch the cost of fuel drop just on the enactment of these two mandates - that would reveal and take care of the futures speculators.

[azman80]

Well, it looks like its time for our government to stop giving billions of dollars to countries like Israel, Columbia, etc....and use that money to subsidize our gas prices. Its going to take a hell of a revolution by the media and by us to get this going. There is no other option. Its either that or start investing in solar powered/battery powered scooters to get from work and home.

[azman80]

Well, it looks like its time for our government to stop giving billions of dollars to countries like Israel, Columbia, etc....and use that money to subsidize our gas prices. Its going to take a hell of a revolution by the media and by us to get this going. There is no other option. Its either that or start investing in solar powered/battery powered scooters to get from work and home.

[libsrweak]

conserve..............

that is the answer..and i am not even going to ask you to worship me or pay me for that..

JUST EFFING CONSERVE....OIL..WATER..RESOURCES..

whinning about it will not solve it..AND WE HAD BEEN WHINNING ABOUT THIS FOR A LLLLLLLLLLLLOOOOOOONG TIME NOW..meaning it the ''lets whine about it'' solution DOES NOT WORK..

[simpsonman19]

I think we all need to send a message to the oil companies, the traders and opec that the American consumer has absolutly had it with high gas prices. If people just drive to and from work and make almost no additional trips like to the grocery store (stop there on the way home from work), mall, restaurants, etc. We will dramatically reduce the amount of gas we use thus driving up supply and then the traders will get scared and sell off thus driving the price down. I know it won''t be a major move, but at least we the people can begin to have some power back. Shouldn''t the comsumer be dictating prices? Not opec, the traders and the oil companies?

[swwils]

I don''t understand why gas keeps climbing,I mean I am a thinker and know that the executives of these oil companies are just getting richer,and richer as the average Joe and below suffer.What I don''t understand is why the politicians are allowing it.They do work for the people the last I heard.When the oil causes the economy to collapse where do the rich think their groceries will come from.The little people drive the trucks that deliver to the stores.The little people own the little stores,also stock the shelves.When gas climbs to the same price people are making for an hour of work will that get America off their cans to protest?

[cattlekate]

Think gas prices are high in the US? In the UK, gas costs at least $7-8 per gallon. Posted by JT_Lancer at 07:03 PM : Apr 08, 2008

Shoot - forgot to give credit to the author!

[cattlekate]

Think gas prices are high in the US? In the UK, gas costs at least $7-8 per gallon.

They also have extensive mass transit out there, and no place like our American West.

[jt_lancer]

Think gas prices are high in the US? In the UK, gas costs at least $7-8 per gallon. That''s because there is a 75% tax on the price of gas that is used to pay for their ''free'' health care.

Besides, advocates of alternative energies should applaud high gas prices, because it encourages investment in those technologies.

If gas was still $1.25 per gallon, who in their right mind would invest in competing technology that would be far more expensive?

[naucoming4u]

$3.75 (average) per gallon for the San Francisco/Bay Area region...

...can anyone top that?