Gas at the pump is within striking distance of May's all-time record of $3.227 a gallon, having risen 0.6 cent overnight to a national average of $3.111, according to AAA and the Oil Price Information Service. Fred Rozell, retail pricing director at the service, said gas may rise another 10 to 15 cents a gallon in the coming weeks as it catches up with oil prices that have soared close to $100 a barrel.
"We think there's room for the price nationally to set a new record," said Geoff Sundstrom, an AAA spokesman.
Oil futures, meanwhile, rebounded Wednesday after a sharp decline the previous session as investors started questioning whether OPEC will increase production. Light, sweet crude for December delivery rose $2.55 to $93.72 a barrel on the New York Mercantile Exchange after a $3.45 drop Tuesday.
Americans are starting to feel more pain from fuel costs because they are rising as a percentage of income. According to a new Oil Price Information Service study, it now costs 3.8 percent of median household income to fuel a single vehicle, up from 1.9 percent in 2002.
Those percentages are dramatically higher in the South and Midwest. The average household in Wilcox County, Ala., for instance, spends 12.7 percent of its income fueling each vehicle, compared to the 1.52 percent the average household in Hunterdon County, N.J. spends.
Rozell believes consumers are starting to cut back on their driving.
"Retailers that I've been talking to have been saying that demand ... is down or flat," Rozell said, predicting that demand for gasoline will fall first in the South and Midwest.
"Unfortunately, this price increase, for a lot of Americans, is going to be very difficult this year," Sundstrom said.
On average, families may find themselves spending an additional $80 to $90 a month on gasoline this holiday season, he said. Many people will find they can't cut the amount they drive, and so will spend less on other things, Sundstrom said.
Sundstrom cautioned that if oil drops below $90 a barrel, the predictions of record gas prices might not come to pass. But crude's rebound Wednesday again raised the prospect that prices could rise to $100 a barrel, or higher. Oil peaked at $98.62 last week.
Prices rose Wednesday after OPEC Secretary General Abdalla Salem el-Badri said there is no need for the Organization of Petroleum Exporting Countries to add more oil to the market, according to Dow Jones Newswires.
Oil prices fell earlier this week in part due to comments from Saudi Arabia's oil minister suggesting that the cartel will discuss raising production at a meeting next month.
Meanwhile, the dollar slipped on Wednesday, driving investors back to crude futures. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the U.S. currency is falling.
Investors were also encouraged by a Labor Department report that inflation at the wholesale level rose only 0.1 percent in October. That increase reignited hopes that the Federal Reserve could cut interest rates again soon, said John Kilduff, vice president of risk management at MF Global UK Ltd. That could pull the dollar lower again.
"The levers that had been working to get oil prices up are back in operation this morning," Kilduff said.
Other petroleum futures also rose Wednesday. December gasoline jumped 4.48 cents to $2.3615 a gallon on the Nymex, while heating oil for December delivery added 6.64 cents to $2.5685 a gallon.
Nymex natural gas for December fell 2.4 cents to $7.925 per 1,000 cubic feet.
In London, December Brent crude futures rose $2.29 to $91.12 a barrel on the ICE Futures exchange.
Expectations that oil inventories fell last week also supported prices. The Energy Information Administration's weekly inventory report, delayed until Thursday this week due to Monday's Veteran's Day holiday, is expected to show that crude oil supplies fell by 300,000 barrels last week, according to the average estimate of analysts polled by Dow Jones Newswires. Gasoline inventories, on average, likely fell 100,000 barrels, while distillate stocks were expected to fall 300,000 barrels. Refinery use likely rose 0.7 percentage point to 86.9 percent of capacity.
By JOHN WILEN
AP Business Writer