Gasoline demand isn't driving up prices, like it does when the summer driving season begins. Instead, investors are betting that oil prices will rise as the Federal Reserve's attempt to stimulate the U.S. economy by purchasing $600 billion in bonds gets into full swing.
The national average for a gallon of unleaded regular gasoline was $2.854 Monday, according to AAA, Wright Express and Oil Price Information Service. That's up about a nickel from a week ago and closing in on the high of $2.92 hit in early May. Gas was selling for around $2.68 on Labor Day.
Oil prices reached $87.49 earlier Monday, eclipsing the previous settlement high of $87.15 a barrel in early May. The price has risen more than 16 percent since Labor Day.
"For now, it's all about crude and it's all about the perception that crude is one of the greatest (investment) places to park your money," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Motorists in California, Washington, Oregon, New York and Illinois are among drivers paying the highest prices, in a range between $2.954 a gallon to $3.516 a gallon. The lowest prices range between $2.654 a gallon and $2.705 a gallon, and are found mostly in the Midwest, Texas and the South.
Kloza isn't sure gas will average $3 a gallon gasoline before the end of the year, but said it appears to be moving toward $2.90 a gallon in most areas.
The Federal Reserve plans to about $75 billion in bonds per month though the middle of next year, which effectively will decrease already low interest rates. That might boost lending but the influx of dollars weakens the value of the U.S currency.
Oil is priced in dollars and becomes cheaper for holders of foreign currency when the dollar is weaker against other currencies.
Benchmark oil for December delivery rose 15 cents to $87 a barrel in early trading on the New York Mercantile Exchange.
In other early Nymex trading in December contracts, heating oil rosel 0.97 cent to $2.3945 a gallon, gasoline gave was unchanged at $2.18 a gallon and natural gas added 10.5 cents to settle at $4.042 per 1,000 cubic feet.
In London, Brent crude rose 33 cents to $88.44 a barrel on the ICE Futures exchange.