Gas prices hit record, likely to keep rising

Local gas prices are slightly below the national average.

STAFF/WIRE REPORT

NEW YORK — Retail gas prices rose further above a national average of $4 Monday, and are likely to keep rising as distributors and retailers increase prices in response to last week’s unprecedented oil price rally. Oil futures, meanwhile, retreated as investors sold to lock in profits from the run-up, though oil prices may be headed even higher.

At the pump, the national average price of a gallon of regular gas rose 1.8 cents overnight to a record $4.023, according to AAA and the Oil Price Information Service. Prices first moved above $4 nationally on Sunday, though they’ve been higher than that in many parts of the country for weeks.

AAA reported that prices in the Mahoning Valley were $3.977, which was about 3 cents higher than was reported Sunday.

If oil prices remain near $139 a barrel, last week’s record high, gas prices will likely rise another dime in coming days, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.

“The numbers do have some catching up to do,” Kloza said. “There’s a bit of a tape delay that happens with gasoline.”

Consumers are cutting back on their consumption of gas in response to the high prices, but gasoline producers have little choice but to keep raising prices when the cost of their chief raw material — crude oil — rises. Friday’s jump of nearly $11 in oil prices put new life into gas prices, which had appeared to be topping out.

At $150 a barrel — the Morgan Stanley price prediction that helped ignite Friday’s oil rally — gas would cost about $4.40 a gallon, Kloza said.

Gas prices often peak around Memorial Day, then retreat over the course of the summer. But this is far from a normal year. Oil prices have been marching steadily higher since last fall, and occasional price corrections of $10, or more, have been followed by rapid rebounds to new heights. Last week, oil prices rose nearly 14 percent in two days, trading as high as $139.12 a barrel, after slumping more than $13 from a previous record high.

On Monday, light, sweet crude for July delivery fell $2.74 to $135.80 a barrel in volatile trading on the New York Mercantile Exchange.

“There’s some profit taking going on, which is understandable after that sort of move,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.

One of the factors that underpinned Friday’s rally — an Israeli cabinet minister’s comment that his nation might attack Iran if it didn’t halt its nuclear program — appeared to dissipate over the weekend as Israeli Prime Minister Ehud Olmert distanced himself from the comments and other officials noted that the minister, Transportation Minister Shaul Mofaz, had not been expressing official government policy.

But other factors support high oil prices. An explosion last week at a natural gas production facility in Australia has boosted demand for diesel by that country’s mining sector, Armstrong said. In Nigeria, a major U.S. oil supplier, a strike later this week could take 450,000 barrels in daily oil supplies off the market, Armstrong said. Both events highlight how tight oil supplies are.