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U.S. Gas Prices Near Record High

Published:

CBS/AP) Gasoline prices were poised Monday to set a new record at the pump, having surged to within half a cent of their record high of $3.227 a gallon. Oil prices, meanwhile, surged above $108 to a new inflation-adjusted record and their fifth new high in the last six 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 surging demand and a string of refinery outages raised concerns about supplies.

That record will likely be left in the dust soon as gas prices accelerate toward levels that could approach $4 a gallon, though most analysts believe prices will peak below that psychologically significant mark. In its last forecast, released last month, the Energy Department said prices will likely peak around $3.40 a gallon this spring; a new forecast is due Tuesday.

The high prices are affecting transportation habits. New numbers out Monday show Americans took more than 10 billion trips on public transportation last year - the most in 50 years, reports CBS News correspondent Ben Tracy. Even in car-centric Los Angeles, subway ridership is up.

Economists say the economic slowdown and the rude awakening that high gas prices are here to stay are finally changing behavior, Tracy adds.

"We're seeing an increase in public transportation nationwide, SUV sales are down, hybrid sales are up. This is a national trend," says Christopher Knittel, an economist at the University of California at Davis.

Retail gas prices are following crude oil, which has jumped 25 percent in a month. On Monday, crude prices surged to yet 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(eral Reserve) 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 while demand is falling.

"By gobbling up everything in sight, (investors) are pushing food and fuel prices to ruinously high levels," said Peter Beutel, president of the energy risk management firm Cameron Hanover, in a research note.

Investors shrugged off a weekend cooling of tensions in South America, where Venezuela said Sunday it was restoring full diplomatic ties with Colombia after they were broken off following a cross-border Colombian attack on a leftist rebel camp in Ecuador.

Last week, rebels shut down a Colombian oil pipeline in retaliation for the Colombian raid into Ecuador. Venezuela threatened to slash trade and nationalize Colombian-owned businesses, and Venezuela and Ecuador briefly sent troops to their borders with Colombia.

The potential for conflict involving Venezuela, an OPEC member and major U.S. oil supplier, helped push oil higher last week.

"The Venezuelan production was at risk there," Samples said.

Other energy futures also rose Monday. April heating oil futures rose 2.64 cents to settle at $2.9734 a gallon while April gasoline futures rose 2.06 cents to settle at $2.7149 a gallon.

April natural gas futures jumped 25.5 cents to $10.024 per 1,000 cubic feet, the first time a natural gas contract has closed above $10 since January 2006. Natural gas was following oil higher, but also rising in anticipation of cooler temperatures across the Midwest and Northeast, analysts said.

In London, Brent crude futures rose $1.78 to $104.16 a barrel on the ICE Futures exchange.

Entry #1,309

Comments

1.
LOTTOMIKEComment by LOTTOMIKE - March 10, 2008, 11:18 pm
GREED.
2.
konaneComment by konane - March 11, 2008, 10:46 am
Supply and demand. The media has been in a well orchestrated effort to change world opinion about the US for the purpose of devaluing our dollar in order for the Euro to be replaced as the benchmark currency for petroleum purposes. It's worked splendidly!

As a side "benefit" of dollar devaluation and tanking the economy it's far easier to continue with dissolution of the US as we know it into the North American Union with out dollars being replaced by the Amero currency.

Due to environmentalist lawsuits no new petroleum refineries have been built in [if memory is correct] 20 years. Additionally every time a bill comes up to drill in oil rich ANWA it's defeated by environmentalists soooooo we have to continue purchasing from OPEC.

Finally back to supply and demand the burgeoning economy of China is surpassing and will exceed the US in its DEMAND for petroleum [and concrete] making SUPPLIES shorter which drives the price up accordingly.

Simple economics, not greed.
3.
NBey6Comment by NBey6 - March 11, 2008, 11:22 am
I say this with LOVE, not to be attacked:

Take back your power, America The Beautiful and walk. Make the sacrifice, if you can and walk. DO NOT give these greedy whoremongers your life force so easily. Make them earn it. Stay away from the pumps, drive your most efficient car,if you must drive and those taking their children to school so their kids can feel special, teach them about, conservation and United We Stand!!!
4.
TenajComment by Tenaj - March 11, 2008, 2:57 pm
Simple economics my ass.

It's enough of everything to go around over and over. Economics is just a "term" used to hide behind flesh and blood, greedy, corrupt human beings.
5.
konaneComment by konane - March 11, 2008, 4:03 pm
Takes money to get petroleum out of the ground, to its destination, to refine it. With oil prices on the rise there will be more exploration, more supply and prices will drop. Supply and demand, Economics 101.

I frankly object to price controls set by OPEC and feel supply and demand should float on the world market not contained within this conglomerate, however don't know the long range implications to world economies if that were the case.
6.
time*treatComment by time*treat - March 11, 2008, 4:38 pm
We know where to oil is. In the industrialized nations, it's a regs nightmare to drill for it & build refinery capacity. NIMBY (It seems we have this topic every spring). But not to worry. The long term goal is to make it too costly for the commoners to drive autos.
7.
jarasanComment by jarasan - March 11, 2008, 6:04 pm
Most of our oil comes from Mexico, Canada, Venezuela, and here, not the middle east. Speculators are driving this thing, I think there will be some technological breakthrough that will make oil much cheaper. We all have to remember that not only gasoline comes from oil, gasoline is about 30% of what comes from a barrel of crude. OPEC oil mostly supplys the other side of the ocean, we get close to 10%- 15% from OPEC. And now 10% of gasoline is ethanol, volume-wise that is huge, ethanol is taking up some volume.

8.
time*treatComment by time*treat - March 11, 2008, 6:31 pm
The lobbyists for the huge companies that do business with the corn farmers have seen to it that (more efficient) non-food ethanol takes a distant back seat to the corn-based ethanol. The price of corn is now following fuel prices instead of food prices. Since corn (starch, syrup, kernels) is used in much of the food chain and to feed livestock, you will see a *big* increase in the prices of food (chicken, beef, cereal, milk, fish, soup) to go along with the increases in the price of gasoline. Some of us have been blogging about it. It's not just in the States, either. They are feeling it in Europe and Australia, too.
9.
jarasanComment by jarasan - March 11, 2008, 7:03 pm
There is another little talked about issue with ethanol, if the powertrain of said vehicle doesn't have the technology to use the ethanol mixture efficiently, the fuel efficiency of the vehicle goes down the toilet, the powertrains of most vehicles on the road were designed to run on gasoline 100%, the ethanol messes this up big time, my fuel efficiency has worsened by close to 10%-15% which is approx. the percentage component of the ethanol in the gas mixture now at your gas pump. I think someone should invent some sort of easy retrofit for auto-engines to take advantage of the ethanol component in gasoline (10% ethanol), it may not be so simple. I drive a lot for work, my MPG has gone down for the count, I keep my vehicles tuned up, no better. Gas smells nasty now, used to smell much better! You can really detect the ethanol.
10.
JAP69Comment by JAP69 - March 11, 2008, 8:06 pm
Yep.
A couple years ago I could drive back and forth to work for $25.00 a week.
Today my weekly cost is close to $100.00 a week with no increase in wages.
Don't want to bitch but the crunch is hurting.
11.
LOTTOMIKEComment by LOTTOMIKE - March 11, 2008, 8:13 pm
i agree,i've had to work an extra day due just to rising gas prices,we all need to bitch because if we don't its going to continue to get worse.its getting downright scary.
12.
konaneComment by konane - March 11, 2008, 11:03 pm
Everything is plastic now which comes from crude, a greater consumer of petroleum than gasoline as Jarasan alluded to. Look at the plastic everywhere and know why crude is so high.
13.
four4meComment by four4me - March 12, 2008, 2:50 am
They are just coming to grips that using alternative fuels made from corn and other farmed products will be even more harmful to the planet than gasoline. As the farming process produces containments that are just as damaging to the ozone layer and mother earth.

There is plenty of oil even though other countries are joining us in the fun of driving. THE PROBLEM IS WE DON'T HAVE ENOUGH FUEL MANUFACTURING PLANTS IN THE USA. We sort of stopped building them and to build one takes up-wards of 5 to 10 years. There are no plans to build additional ones and it was determined that buy this time the big three automakers would have solved the fuel problem and designed a gasoline free engine. That idea is still in the development stage. Don't hold your breath.

The auto makers realized a long time ago that building automotive products that didn't need fuel gasoline type engines would result in less people having the need to buy newer vehicles as these newer type engines wouldn't break down or wear out as fast as the junk they build today. Also if they ever figure out how to make battery cars function well enough for people to use. How are the people in the inner city's going to get power from their house to the cars are we expected to have extension cords laying all over the city streets NOT.

The problem of creating a newer type automotive engine isn't the problem it's the automakers who don't really want to do away with the gasoline type engines. They want you to buy a automotive product that will need servicing as this will keep dealers and parts manufactures in business forever. A battery type of engine would outlast your great grand kids. Basically the only thing it would need is tires, brakes, windshields wipers and a few other moving parts. We won't see these type vehicles mass produced for another 50 years. And there still would have to be a phase out period of gasoline type vehicles which many a folk will be livid about.

Right now all we can do is bite the bullet and try and force the president to have additional fuel possessing plants built. ASAP



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