Gas prices rise to new record
NEW YORK (AP) - March 11, 2008 Gas prices at the pump rose overnight to a record national
average of $3.2272 a gallon, according to AAA and the Oil Price
Information Service. That's a tad higher than the previous record
of $3.2265, set last May.
A year ago, rising demand and a string of refinery outages had
raised concerns about supplies. Now, the soaring price of crude oil
is the culprit, propelling gas higher even though supplies are at
15-year highs.
On Tuesday, light sweet crude for April delivery surged to a new
record of $109.72 on the New York Mercantile Exchange before
falling after the International Energy Agency cut its forecasts for
crude consumption this year. In midday trading, crude futures
fluctuated, rising 23 cents to $108.13 a barrel but alternating
between gains and losses.
Where oil goes from here is anybody's guess. Many analysts
expect prices to moderate, while others predict oil could keep
rising to $120 a barrel, or higher. And with demand for gas
expected to rise as warm weather arrives, analysts say pump prices
will likely spike as high as $3.50 to $3.75 a gallon, regardless of
what happens with oil prices.
That doesn't sit well with some consumers.
"I've got to say, if they ever go up to $3.50, that would be
the point where I'd feel angry," said Alex Magby, a Morrisville,
Pa., resident who was gassing up near his New Jersey restaurant job
one recent afternoon. "I'd feel cheated at that point."
Still, because gas is so expensive, analysts expect demand for
fuel will rise more slowly this spring and summer than in previous
years. Nationwide demand for gasoline is off by about 1 percent
over the last 6 weeks, a trend analysts expect to accelerate if
prices keep rising.
"It evokes a real reaction in demand destruction above $3.25 a
gallon," said Tom Kloza, publisher and chief oil analyst at the
Oil Price Information Service in Wall, N.J.
The effect can be seen in states such as California, where
prices are consistently 30 cents higher than the national average.
Last November, the latest month for which data is available, demand
for gasoline fell by 3.7 percent from the previous year in
California as prices soared past $3.40 a gallon.
On Tuesday, the average price of a gallon of gas in California
stood at $3.581 a gallon. Prices have already passed the $4 mark at
many stations nationwide. But Kloza thinks slower demand growth
will prevent the national average from rising that high.
High gas prices may actually help some companies that rely on
tourism. Carl Wilgus, executive director of the Pocono Mountains
Visitors Bureau, said the number of skiers visiting the
Pennsylvania ski region this winter was up, despite gas prices
holding steady above $3 for most of that time. In part, that's
because many people plan vacations closer to home when fuel is so
expensive, he said, giving up a trip to Florida in favor of a ski
vacation an hour away, he said.
"We'll definitely lose some visitation, but hopefully we'll
gain some from the folks who hope to stay closer to home," Wilgus
said.
The sheer price of gassing a recreational vehicle may induce
some to look for campgrounds closer to home this summer. At $3.50 a
gallon, a 100-gallon Winnebago Destination RV will cost $350 to
fill, $27 more than right now, and $96 more than a year ago.
Analysts believe oil's underlying supply and demand fundamentals
do not support such high prices, and argue that crude's rise in
recent months is mostly due to the falling dollar. Crude futures
offer a hedge against a falling dollar, and oil futures bought and
sold in dollars are more attractive to foreign investors when the
dollar is weak.
The IEA, an energy consultant to western, industrialized
nations, raised more concerns about the economic slowdown's impact
on oil consumption, and cut demand growth forecasts for the U.S.,
Europe and other developed nations this year by about 190,000
barrels a day.
Other energy futures were mixed Tuesday. April heating oil
futures fell 0.98 to $2.9636 a gallon while April gasoline futures
fell 1.64 cents to $2.6985 a gallon.
April natural gas futures fell 4.7 cents to $9.977 per 1,000
cubic feet after.
In London, April Brent crude futures rose 16 cents to trade at
$104.32 a barrel.