Gas prices hit new record as oil jumps to $110
NEW YORK -- Gas and oil prices jumped to new highs today as the dollar weakened, although crude's gains were limited by fresh evidence of a U.S. economic slowdown.
At the pump, U.S. retail gas prices surged 2.1 cents overnight to a record national average of $3.267 a gallon, according to AAA and the Oil Price Information Service. Gas prices are likely to rise much higher this spring; estimates range from about $3.50 a gallon in the Energy Department's latest forecast to $3.75 or even $4 a gallon according to some analysts.
Diesel fuel, used to transport the vast majority of the nation's consumer goods, also hit a new record. Diesel prices rose another 3.3 cents overnight to a record average of $3.909 a gallon.
Gas and diesel are following crude, which has risen to records in 12 of the last 13 trading sessions. Analysts blame oil's ascent on weakness in the dollar, which dropped to yet another new low against the euro Thursday. 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. Interest rate cuts further weaken the dollar, and have helped fuel oil's rise, especially with another reduction expected next Tuesday at the Federal Reserve's regularly scheduled monetary policy meeting.
Light sweet crude for April delivery surged to a new trading record of $111 on the New York Mercantile Exchange Thursday, then slipped back in the normal ebb and flow of trading. In midday trading, the oil futures fell 14 cents to $109.78 a barrel.
"This cocktail's been whipped up by the Federal Reserve," said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm.
Analysts said the Commerce Department report that retail sales fell in February raised new worries that the economy is headed for recession and might curtail demand for oil. Those concerns limited oil's gains, but analysts expect any oil price weakness to be short-lived, and for oil to maintain its upward track.
For consumers, that means pain at the pump -- and in the form of higher prices for food and consumer goods, primarily related to rising fuel costs -- will continue into the foreseeable future.
"There's really no end in sight to this," Cordier said.
Other energy futures were mixed Thursday. April gasoline futures fell 4.28 cents to $2.6858 a gallon, while April heating oil futures rose 4.27 cents to $3.0671 a gallon after earlier rising to a trading record of $3.086 a gallon.
April natural gas futures rose 11.2 cents to $10.123 per 1,000 cubic feet. The Energy Department reported that gas inventories fell by 86 billion cubic feet last week, slightly higher than the 83 billion cubic foot withdrawl analysts surveyed by Dow Jones Newswires were expecting.
In London, April Brent crude rose 67 cents to $106.94 a barrel on the ICE Futures exchange.