CBSN

Gas Prices Keep On Truckin'

A motorist pumps gasoline in Boston, Friday, May 21, 2004. Everyone knows the United States relies heavily on foreign oil. But most people don't realize the nation also increasingly needs imported gasoline, a trend that's contributing to the recent spike in prices at the pump. (AP Photo/Steven Senne)
AP
After crossing the $2 threshold, gas prices across the country have continued to rise — and show no signs of slowing their climb, according to an industry analyst.

The weighted national average for all three grades of gasoline was $2.10 per gallon on Friday after rising more than 14 cents in the past two weeks, said Trilby Lundberg, who publishes the biweekly Lundberg Survey, which regularly polls 8,000 gas stations across the United States.

The rise was caused by increased demand created by market pressures and seasonal environmental regulations requiring a move to costlier formulas, she said Sunday.

"So far the higher prices have not chased demand away, and our biggest demand season is yet to come," she said. "There is no evidence yet that gasoline prices are peaking. They may soon, but there's no evidence that that is occurring yet."

Meanwhile, the U.S. energy secretary said that Saudi Arabia has assured Washington it will supply up to 2 million barrels a day in additional crude oil if the market demands it.

The pledge underscored differences within the Organization of Petroleum Exporting Countries, which has come under intense pressure from the United States and other oil-importing countries to boost output to calm markets and reduce prices. Saudi Arabia is OPEC's most influential member, and it alone has significant unused capacity to pump more oil quickly.

Lundberg predicted that oil supply will rise whether or not OPEC agrees to officially raise its quota at its Beirut meeting on June 3. She said the current high prices will be "irresistible" for oil-producing nations, and they will unofficially release more oil even if OPEC votes not to.

"They've been doing this for months and we can expect it to continue and even increase," Lundberg said.

Lundberg said oil price drops won't necessarily result in lower U.S. gas prices. She said the reductions would be at least partially offset by increased demand from economic growth, environmental regulations, and an increase in driving during the summer months.

The average price of gasoline has broken all-time record highs for three months straight, although the average price remains lower than the peak gas price in March 1981 when adjusted for inflation, Lundberg said. That price, adjusted for today's dollars, was $2.91 for all grades combined, she said.

The national weighted average price of gasoline at self-serve pumps on Friday, including taxes, was about $2.07 for self-service regular; $2.17 for mid-grade, and $2.26 for premium.

San Diego had the highest average price of any city, with self-serve regular selling for an average of $2.36. The average for self-serve regular in California was $2.33.

Energy Secretary Spencer Abraham told reporters Sunday that Saudi Arabia has pledged to pump an additional 600,000 barrels a day starting in June, lifting its daily output to 9.1 million barrels.

He said he expected the new Saudi commitment would help reassure oil markets about the reliability of supplies.

"It's very good news," oil-analyst John Kilduff tells CBS Radio News, because the price of oil is now "too expensive other people's eyes."

However, as oil prices have soared above $40 a barrel in recent weeks, some OPEC members said there is enough oil on the market already, and argued that the high prices are a result of the war in Iraq and instability in the Gulf.

An unforeseen burst in global demand, particularly from China and the United States, is also blamed.

Although OPEC expressed concern about the sharp rise in oil prices, it announced Saturday it was deferring a decision about increasing its ceiling until it meets in Beirut.

OPEC members, led by Saudi Arabia, agreed as recently as March to cut production by 1 million barrels a day in anticipation of a lull in seasonal demand.

The Saudi Oil Ministry proposed Friday that OPEC increase its production ceiling by 2 million barrels a day, or 8.5 percent. At the same time, it pledged to raise its own output to at least 9 million barrels in June. Any fresh Saudi crude would take several weeks to reach U.S. ports,

Naimi's assurances to Abraham represent a dramatic shift in Saudi policy that angered some OPEC colleagues.

Venezuela's Oil Minister Rafael Ramirez blamed U.S. policy in Iraq for causing high crude prices by destabilizing the Middle East. He argued that an increase in oil production would do nothing to help push prices lower.

"There is no question that the current U.S. policy is to blame for the current high prices of oil," Ramirez told a news conference.

The differences between Saudi Arabia and Venezuela over OPEC policy are playing out against the backdrop of the U.S. presidential campaign.

Saudi Arabia has close ties with President Bush, whose re-election prospects have suffered due to high gasoline prices. Venezuelan President Hugo Chavez has accused the Bush administration of supporting efforts to topple his leftist government.