Americans getting an early start on the Memorial Day weekend found that gasoline prices again sprinted to a new record high overnight, reaching a national average above $3.83 a gallon. Some analysts predict gas will break past $4 as early as next week.
Oil prices, meanwhile, fell Thursday after setting a new trading record of $135.09 overnight. A stronger dollar gave some investors reason to sell oil futures to lock in profits from crude's record run. But concerns about falling supplies and rising demand are expected to keep propelling prices higher in the days and weeks to come.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
Oil's surge is contributing directly to the pain consumers feel every time they fill up. At the pump, the average national price of a gallon of regular gas rose 2.4 cents overnight to $3.831, according to a survey of stations by AAA and the Oil Price Information Service. Prices are 61 cents higher than a year ago.
Unlike last year, oil prices are setting record highs on a daily basis. That's pushing gas prices higher, and analysts see no reason for gas not to follow.
“We're going to blast past $4,” said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
Prices may rise as high as $3.90 nationally by this weekend, he said. Prices are already above $4 a gallon at many stations and average more than $4 in California, New York and Illinois, among other states.
Oil prices rose to $135.09 per barrel in overnight electronic trading on the New York Mercantile Exchange before retreating to settle down $2.36 at $130.81 a barrel by afternoon in New York.
Analysts said oil futures are caught between the supply and demand concerns that boosted crude to its latest record, and a desire by some investors to cash in some profits. The dollar, one of the factors that has fed oil's rally from about $65 a year ago, strengthened against the euro Thursday. When the greenback gains ground, commodities such as oil lose their value as hedges against inflation. Also, a stronger dollar makes oil more expensive to investors overseas.
The Paris-based International Energy Agency on Thursday said it is worried about whether there is enough oil to meet global demand, and is working on a review of the world's 400 largest oil fields that could lead to a major revision in its closely watched forecasts.
“The market is really structurally tight…oil demand is not growing that fast but supply is constrained,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.