New record high gas prices

May 19, 2008 6:48:03 PM PDT
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 a nickel 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, fuel price analyst at AAA.

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

Rose Bonesso, a nonprofit worker, said 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.

Drivers in some parts of the country are already paying considerably more than the average. Prices in parts of California have been stuck above $4 a gallon for weeks now, 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 about $3.23 a year ago - are putting a strain on family finances and prompting some motorists to look for alternatives.

Jeanne Prows of West Chester, Ohio, said she and her husband are considering riding to work together to save on gas.

"We really don't have the extra cash this summer," she said.

In New Haven, Conn., drivers paid $4.05 for regular unleaded gas Monday.

Stacey Holmes, a teacher who lives and works in New Haven, said the high prices recently led her to buy a $20 used bicycle online so she can bike the three miles to work to save money.

"It just makes you a lot more aware of your budget," Holmes said. "I don't eat out much at all any more."

Sally Richmond, a paralegal from New Haven, said she's "a little angry, confused" at the gas prices. She said she now drives slower, which has helped.

"We can't cut back any more than we have," Richmond said.

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

Oil prices shot higher Monday on a report that the Organization of Petroleum Exporting Countries would not increase production before its next meeting Sept. 9. Algerian Energy Minister Chakib Khelil, the current 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 the world's largest oil producer had raised production by 300,000 barrels a day earlier this month.

That increase, while largely ignored by the market, 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.

Meanwhile, Holly Corp. said a key unit at its New Mexico refinery was shut down for repairs, cutting estimated May gasoline production by as much as 756,000 gallons per day. The outage is unlikely to significantly affect fuel prices, said Jim Ritterbusch, president of oil trading advisory firm Ritterbusch & Associates.

Trading is likely to be volatile on Tuesday as the June contract for crude expires on the Nymex. Traders typically adjust their holdings as a contract is about to expire, and that often leads to big price swings.

In other Nymex trading, heating oil futures fell 2.77 cents to settle at $3.6751 a gallon. Gasoline futures rose 1.31 cents to settle at $3.2366 a gallon. Natural gas futures sank 14 cents to settle at $10.927 per 1,000 cubic feet.

July Brent crude rose 7 cents to settle at $125.06 a barrel on the ICE Futures exchange in London.


Associated Press Writers John Christoffersen in New Haven, Conn., Daniel Lovering in Pittsburgh and Dan Sewell in Cincinnati contributed to this report.