Gas Prices Keep Climbing

Gas prices over $3.00 per gallon are seen on display at a Union 76 gas station March 7, 2007 in San Francisco, California.
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Gasoline prices rose yet again at the pump Monday, but fell along with oil in the futures market as traders bet that the government will report an increase in gasoline inventories this week.

The national average price of a gallon of gas reached $3.035 Monday, up 0.1 cent overnight and more than 2 cents since Friday, according to AAA and the Oil Price Information Service. In some parts of the country, however, gas is approaching $4 a gallon.

Gas prices have risen sharply in recent weeks on concerns that refineries aren't making enough to meet peak summer demand.

A series of incidents, like a fire last month at an Oklahoma refinery, have severely cut output to near-record lows, and the peak summer driving season, which begins on the Memorial Day weekend, is still ahead of us, reports CBS News correspondent Anthony Mason.

In the first four months of this year, according to one study, we spent nearly $37 billion more for gas than we did just five years ago, Mason reports. The average American household spent $1,600 on gas in 2002; this year, that's expected to jump to $2,600.

But retail prices lag oil and gasoline futures prices. And while both futures contracts have also risen in recent weeks, they were trading lower Monday.

Gasoline futures for June delivery fell 2.68 cents a gallon to settle at $2.1896 on the New York Mercantile Exchange. Light, sweet crude for June delivery fell 46 cents a barrel to settle at $61.47 on the Nymex.

In other Nymex trading Monday, heating oil futures fell 2.8 cents to settle at $1.8029 a gallon while natural gas prices fell 15.9 cents to settle at $7.779 per 1,000 cubic feet.

Brent crude for June delivery fell 87 cents to settle at $64.44 a barrel on the ICE Futures exchange in London.

Jim Ritterbusch, president of Ritterbusch & Associates, in Galena, Ill., says there hasn't been any fundamental change in the oil and gasoline futures markets.

"We're still seeing too much crude oil sloshing around in Cushing, (Okla.)," the oil terminal that supplies many domestic oil refineries, Ritterbusch said.

Unexpected refinery problems are a big part of the reason for the spike in gasoline prices of recent weeks. There have been at least a dozen additional partial shutdowns in the U.S. and internationally that cut refining capacity.

For instance, one of the nation's largest refineries, a BP PLC plant in Indiana that processes more than 400,000 barrels of oil per day, will not be operating at full capacity for several months due to unexpected repairs. Other examples include a 170,000-barrel-per-day plant in McKee, Texas, that was shut down for a month, and a 470,000 barrel-per-day plant in Texas City that's operating at less than half of capacity.

The refinery problems have led to an oversupply of oil and an undersupply of gasoline. That's pushing oil prices lower, Ritterbusch said. And while gasoline futures prices were down Monday, that could change quickly in a market that remains volatile, he said.

"It's lower, but just last week it was teasing new highs," Ritterbusch said. "You're bound to see some profit-taking."

Jason Schenker, an economist at Wachovia Corp., thinks traders are anticipating an increase in gasoline stockpiles in the U.S. government's weekly inventory report, to be released on Wednesday.

"That gasoline inventory expectation ... could be what's driving the market down," Schenker said.

Analysts last week suggested the market may have sensed a peak in prices for gasoline. But Ritterbusch disagreed, arguing that there will have to be evidence of a substantial build in gasoline inventories before prices drop significantly.

"It's premature to say we've seen the highs," Ritterbusch said. "We're one significant refinery problem away from seeing fresh highs."

  • Stephen Smith

    Stephen Smith is a senior editor for