Where are gas prices headed, and why?

A sign shows gasoline prices at a gas station in Carson, California March 2, 2011.
A sign shows gasoline prices at a gas station in Carson, California March 2, 2011. The price of crude oil jumped to above USD102 a barrel as violent clashes in Libya between leader Moamer Kadhafi's forces and the opposition stoked concerns about the country's oil production. AFP PHOTO / ROBYN BECK

NEW YORK - Since the revolt in Libya, gas is up 38 cents, to an average of $3.52 a gallon. That reflects the rise in oil - up another dollar Monday to more than $105 a barrel.

With pump prices rising nearly two cents a day, CBS News senior business correspondent Anthony Mason reports President Obama is weighing his options.

The price run-up in the oil trading pits and the gas pumps has the White House considering tapping into the nation's emergency supply.

"It's an option that on the table," White House press secretary Jay Carney said.

Set up after the Arab oil boycott of 1973, the Strategic Petroleum Reserve holds 726 million barrels of crude oil in four salt caverns along the Texas and Louisiana gulf coast. It's the world's largest emergency oil reservoir - enough for the U.S. to withstand a loss of imports for more than two months. Only the president can authorize its use.

Quick Facts on the Strategic Oil Reserve

Greg Priddy of the Eurasia Group said, "The statutory language that authorizes the president to make that decision is very broad."

It says the reserve may be tapped during "a severe energy supply interruption" that may cause an "adverse impact on....the national economy."

"They can take the economic damage argument and use that if they want to," Priddy added.

Obama considering tapping oil reserves

But the White House has done that only twice: during the first Gulf War in 1991, and then in the wake of Hurricane Katrina in 2005 - when a release of 11 million barrels helped put the brake on gas prices, which dropped from more than $3 a gallon to $2.75 in less than a month.

The price at the pump now is even higher.

Oil prices aren't "much of a threat" to the economy and the recovery, according to economist Lakshman Achuthan.

Oil Surges: Will $5 Gas Follow?

Achuthan says the U.S. economy is actually gaining strength. "The unrest in the Middle East and a spike in oil will not derail this economy anytime soon."

While crude oil production in Libya, which provides 2 percent of the world's oil, has been disrupted - the world is still producing more oil than it uses every day.

"The loss of supply from Libya has been made up to a certain extent with an increase in supply from Saudi Arabia," Andy Lipow said.

So, why then are oil and gas prices soaring again?

Sean Cota of the Petroleum Marketers Association of America said "it's unbridled investment money that is dominating the market, to the point where supply and demand doesn't matter anymore."

Cota says pension and hedge funds have been pouring into the oil market, and bidding up the price. Last week, two-thirds of all oil traded was not sold by oil companies, but by investors.

"The total world energy supply is bought and sold everyday about eight times," Cota added.

Oil and gas prices are not expected to retreat until the unrest ebbs in the Middle East - and analysts say that could be months.

  • Anthony Mason
    Anthony Mason

    CBS News senior business and economics correspondent; Co-host, "CBS This Morning: Saturday"