Gasoline prices near last spring's record

NEW YORK -- Gasoline prices were poised Monday to set a new record at the pump, having increased to within half a cent of its record high of $3.227 a gallon. Oil prices, meanwhile, moved above $108 a barrel to a new inflation-adjusted record and the fifth new high in the last six trading sessions on an upbeat report on wholesale inventories.

The national average price of a gallon of gas rose 0.7 cent overnight to $3.222 a gallon, 69 cents higher than one year ago, according to AAA and the Oil Price Information Service. Last May, prices peaked at $3.227 as rising demand and a string of refinery outages raised concerns about supplies.

In its most recent forecast released last month, the Energy Department said prices will likely peak around $3.40 a gallon this spring; a new forecast is due today.

The average price of a gallon of gas in the Chicago region was $3.294 Monday, according to the AAA.

Retail gas prices are following crude oil, which has jumped 25 percent in a month. On Monday, crude prices hit another record after the Commerce Department said wholesale sales jumped by 2.7 percent in January, their biggest increase in four years, according to Dow Jones Newswires. The strong sales report suggested to oil traders that the struggling economy may be doing better than thought.

Light, sweet crude for April delivery rose $2.75 to settle at a record $107.90 on the New York Mercantile Exchange after earlier setting a new trading record of $108.21.

Energy investors shrugged off a relative stabilization of the dollar and a cooling in tensions between Venezuela and its neighbors Colombia and Ecuador.

Many analysts believe speculative investing attracted by the weak dollar is the primary reason oil has risen so far so fast in recent months. 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 falling.

"We've got a Fed meeting on the 18th that could see a sizeable rate cut," said Brad Samples, an analyst with Summit Energy Services Inc., in Louisville, Ky. "So, it's not over."

Indeed, while the dollar rose against the euro on Monday, many investors believe the greenback is likely to keep falling as the Fed continues to cut rates. Many analysts believe the rise in crude prices is not supported by the market's underlying fundamentals, noting that supplies are generally rising.