Soaring Crude Pushes Gas Closer to $4

Gas prices in parts of California have been above $4 a gallon for weeks.
Gas prices in parts of California have been above $4 a gallon for weeks. (By Justin Sullivan -- Getty Images)

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By Adam Schreck
Associated Press
Tuesday, May 20, 2008

NEW YORK, May 19 -- More gas and oil records fell Monday as retail fuel prices struck new highs and crude settled above $127 for the first time, tightening the squeeze on drivers planning holiday road trips next weekend.

Light, sweet crude for June delivery jumped 76 cents to settle at a record $127.05 a barrel on the New York Mercantile Exchange. Prices rallied at one point to within 5 cents of Friday's record trading high, near $128 a barrel.

Meanwhile, Americans are now paying an average of $3.79 for a gallon of regular gas, according to a survey by AAA and the Oil Price Information Service. Diesel, used to transport a wide range of goods, now costs $4.52 a gallon. Those prices, both records, are likely to keep rising, following crude's upward track.

"We're looking at $4 a gallon [for regular nationwide] once we get past Memorial Day and into June, given the oil prices we're seeing today," said Geoff Sundstrom, a fuel-price analyst at the AAA auto club.

Drivers in some parts of the country are already paying considerably more than the average. Prices in parts of California have been above $4 a gallon for weeks, although the statewide average is down to $3.96. Prices in Alaska and Connecticut are averaging just above $4 a gallon.

Those soaring prices -- which compare with a national average of $3.23 a year ago -- are straining family finances and prompting some consumers to look for alternatives.

In Pittsburgh, some drivers said they had been forced to adjust their spending habits because of higher prices at the pump, up about 17 percent from a peak at this time last year.

Rose Bonesso, a nonprofit worker, said that the rising cost of gas has "hugely" affected her spending and that she was trying to make fewer car trips from her suburban home.

"I definitely think a lot more before I either go to Starbucks or do anything like that because I know, all right, I've got at least $40 to $45 I've got to put in my tank this week," she said while buying gas on Pittsburgh's South Side.

A report released Sunday showed that average retail prices topped $4 a gallon for the first time in two metropolitan areas: Chicago and Long Island. The Lundberg Survey of 7,000 stations nationwide found the cheapest city to be Tucson, where regular unleaded sold for $3.48 on average.

Oil prices shot higher Monday on a report that the Organization of the Petroleum Exporting Countries would not increase production before its next meeting, Sept. 9. Algerian Energy Minister Chakib Khelil, the OPEC president, was quoted in government newspaper El Moudjahid as saying that "current prices aren't linked to the law of supply and demand."

The announcement came days after Saudi Arabia's oil minister said it had raised production by 300,000 barrels a day.

That increase, while largely ignored by the financial markets, should help grease a tight global market, said John Felmy, chief economist for the American Petroleum Institute, the industry's leading U.S. trade group.

"Certainly, seeing increased production is helpful in terms of increased supplies," Felmy said.

Daniel Lovering in Pittsburgh contributed to this report.

© 2008 The Washington Post Company

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