Gas prices keep climbing, but relief may be at hand

Gasoline prices continued to set records over the last week, reaching all-time highs across the nation, including California, the Energy Department said Monday.

But relief may be on the way, at least temporarily. Also on Monday, oil prices plunged in New York futures trading, pulling back from record levels as investors feared that the financial crisis that forced the sale of Bear Stearns Cos. is a sign of deep economic trouble.

If oil prices continue to decline as they did Monday -- falling $4.53 to settle at $105.68 a barrel on the New York Mercantile Exchange only hours after futures reached a fresh trading high of $111.80 -- the skyrocketing cost of gasoline and diesel could begin to level off.

Higher energy prices have forced consumers to cut back discretionary spending, a trend that has hurt retail sales. Higher costs for fuel have also driven the price of everything else higher as well.

Since oil moved above $100 a barrel last month, a growing number of analysts have argued that oil prices are in a bubble. Several forecasters have lowered demand growth predictions for this year, while supplies have grown.

“The fundamentals of the oil market didn’t support the prices we had to begin with,” said Addison Armstrong, director of exchange-traded markets at TFS Energy Futures in Stamford, Conn.

The retail price for a gallon of self-serve gasoline reached a new high of $3.284 nationwide, up 5.9 cents from the previous Monday, according to the Energy Department’s weekly survey of service stations. The California average hit a record high of $3.604 a gallon, up 6.7 cents.

Compared with this time last year, the national price is 71 cents higher and the California price is 48 cents higher.

The per-gallon cost of diesel also set records at $4.083 in California, up 12.8 cents, and $3.974 nationwide, up 15.5 cents.

The Energy Department is forecasting that the monthly pump price will peak at $3.48 a gallon this spring on a national basis, though weekly gasoline costs are expected to top $4 in some regions of the country.

In the department’s latest weekly survey of service stations, gasoline was most expensive on the West Coast at $3.523 a gallon, up 6.6 cents. San Francisco had the highest city price at $3.663, up 5.6 cents.

The Gulf Coast states had the cheapest regional price at $3.177 a gallon, up 4.6 cents. Boston had the lowest city price at the pump, up 3.6 cents to $3.113.