Gas Prices Set Record — Again

Eddie Engels of Chicago finishes pumping over $83 of gas into his GMC Yukon, Tuesday, May 15, 2007, near downtown Chicago as gas prices continue to soar.
Retail gasoline prices climbed to another record Monday, while crude oil futures jumped above $65 per barrel amid concerns that U.S. refiners are not producing enough gasoline to meet peak summer demand.

A gallon of regular unleaded costs an average of $3.196, up from $3.178 on Sunday, according to AAA and Oil Price Information Service. Prices are up 33.7 cents from a month ago and 30.4 cents from a year ago, as demand remains strong, and a spate of planned and unexpected refinery shutdowns have constricted supply.

AAA's Robert Sinclair says already 19 states are averaging more than $3.25 a gallon, primarily in the Midwest and on the West Coast, reports CBS News correspondent Anthony Mason.

"As we start a new week, we have an insanely bullish market, which has already advanced to absurdly high levels," Cameron Hanover's Peter Beutel wrote in a research report. "We are running seven weeks behind normal this refinery turnaround season, after taking an extra seven or eight weeks in the fall to maintain refineries."

The U.S. Energy Information Administration reported last week that gasoline inventories — while increasing to 195.2 million barrels for the week ended May 12 — are still well below the average for this time of year. The nation's peak driving season, meanwhile, is set to begin this long Memorial Day weekend.

Thirty-two million American drivers will be traveling as we kick off the peak driving season. And we're using 16 percent more gas than we did just a decade ago. But we haven't built a new refinery since 1976, adds Mason.

"We're at the point now where every refinery in the United States has to run full out, and even then we can't keep up with demand," Lynn Westfall, chief economist at Tesoro Corp., told Mason. "So the effect of one refinery going down now is felt in the marketplace."

Gasoline futures for June delivery rose 1.23 cents to $2.42 per gallon in afternoon trading on the New York Mercantile Exchange.

Light, sweet crude for June delivery jumped $1.29 to $66.23 per barrel on the Nymex after earlier falling as low as $64.45. Brent crude for July delivery added $1.26 to $70.68 on the ICE Futures exchange in London.

Attackers in Nigeria vandalized an oil installation run by Total SA, the company said Monday. No injuries, kidnappings or production cuts were reported, though.

The attackers caused "a couple of barrel's worth" of oil to spill, but production wasn't affected, a Total spokeswoman said. Nigeria is one of the world's largest crude producers, and attacks on oil installations have become an almost daily occurrence following elections there last month.

The next few days likely will be volatile for oil and gasoline futures, said Jim Ritterbusch of oil trading advisory firm Ritterbusch and Associates.

The inauguration of a new president in Nigeria could lead to more violence, which would drive up prices. The June crude contract on the Nymex also expires this week, which could add to price action, and the federal government will release its updated hurricane outlook.

"That's liable to push things around a bit," Ritterbusch said. "We've got things going on here in the next few days."

In other Nymex trading, heating oil futures rose 3.8 cents to $1.9532 a gallon while natural gas prices fell 3.2 cents to $7.912 per 1,000 cubic feet.