Nation & World

<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Do you have a news tip? newstips@heraldnet.com | 425.339.3400   Published: Thursday, May 8, 2008 Gas jumps nearly 3 cents to record; oil crosses $124 By John Wilen Associated Press NEW YORK -- Gasoline and crude oil jumped to new records Thursday, with gas rising 3 cents to an average national price of nearly $3.65 a gallon and oil crossing $124 a barrel for the first time. At the pump, the average price of a gallon of regular gas nationwide rose 2.7 cents to a record $3.645, according to a survey of stations by AAA and the Oil Price Information Service. Diesel prices also rose, adding 0.9 cent to match a record national average of $4.251 a gallon. Gas prices tend to lag oil futures, and with crude rising to a new record near $124 a barrel Wednesday and likely headed higher, it's widely expected the average price of gas will soon rise as high as $4. Motorists in many areas, including parts of California and Hawaii, are already paying that much, or more. "If oil prices go the way that pundits are expecting, there's no way we'll stay under $4 a gallon," said Fadel Gheit, an analyst at Oppenheimer & Co. in New York. Meanwhile, light, sweet crude for June delivery rose 16 cents to reach a settlement record of $123.69 a barrel on the New York Mercantile Exchange Thursday after spending much of the day in negative territory. But in after-market electronic trading, prices shot to a new trading record of $124.61. Analysts said volume was quite low, making it easy for oil to keep pushing higher. "This appears to me to be computer-generated buying," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos. Some investors use software that buys automatically when prices rise to certain levels; Thursday's record settlement may have triggered a flurry of electronic buy orders. "There is no fundamental news out to cause this market to move like this," Rafield said. Bullish momentum -- and expectations that the dollar will continue to weaken against foreign currencies including the euro -- are likely to keep pushing oil to new records, he said. Goldman Sachs analysts recently predicted prices will rise as high as $150 to $200 a barrel within two years. That forecast has driven much of oil's gains in recent days. Analysts at Goldman and firms such as Barclays Capital believe tight global supplies and growing demand from fast-growing economies in countries such as China and India are driving oil higher. But Gheit and analysts including Tim Evans at Citi Futures Perspective argue that supply and demand fundamentals don't support such high prices. "There is no reason why oil prices should be above $60," Gheit said, noting that domestic crude supplies are at average levels, and that refineries are cutting gasoline production as high prices cut consumers demand for fuel. "The physical supplies do not justify the price, it just doesn't make sense." OPEC Secretary General Abdalla Salem El-Badri on Thursday reiterated his position that oil supplies are adequate, and that there is no need for the cartel to boost production. He said several Organization of Petroleum Exporting Countries oil projects are coming on line, but he noted that several member countries are having a hard time finding buyers for their additional supplies. El-Badri agrees with analysts who feel speculative investment driven by the dollar's protracted decline is the real reason behind higher prices. The dollar fell against the euro Thursday, attracting investors who view commodities such as oil as a hedge against inflation. Also, a weaker dollar makes oil cheaper to investors overseas. Still, the market sometimes ignores the dollar, as it did Wednesday when oil surged to new records although the dollar advanced. Some analysts say that's a sign that many investors are buying on pure momentum -- believing prices will head higher regardless of negative data, news or dollar movements. "There's a lot of momentum driving the oil price up," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. In other Nymex trading, June gasoline futures rose 1.96 cents to settle at a record $3.1378 a gallon after earlier rising to a trading record of $3.14, and June heating oil futures rose 6.25 cents to settle at a record $3.5098 a gallon after earlier reaching their own trading record of $3.5152. June natural gas futures fell 6.4 cents to settle at $11.263 per 1,000 cubic feet. The Energy Department said natural gas inventories rose by 65 billion cubic feet last week, but remain slightly below the 5-year average. In London, June Brent crude futures rose 52 cents to settle at $122.84 a barrel on the ICE Futures exchange. -------- AP Business Writers George Jahn in Vienna and Thomas Hogue in Bangkok, Thailand contributed to this report.

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