A respite from rising fuel costs
As oil passed a record $120 a barrel Monday, retail gasoline prices appeared to be taking a breather from their steep climb.
The average price of self-serve regular rose about a penny a gallon during the last week, the Energy Department said Monday. A separate survey by AAA found prices edging lower in recent days.
Does this mean that fuel’s wild spiral has peaked? Not yet, said analysts and experts, who described the latest price readings as a brief lull in a steady increase that probably will continue for at least the next few weeks.
Oil was the primary reason for the pessimism, hitting a new intra-day high of $120.36 a barrel on the New York Mercantile Exchange before closing at a record $119.97, a rise of $3.65. To some market watchers, oil at $125 to $150 a barrel in the near future no longer seemed to stretch the imagination.
“Unfortunately, we will go higher. The markets are still chasing bad news,” said Tom Kloza, chief oil analyst for the Oil Price Information Service, a Wall, N.J.-based price-tracking operation. “The traders are saying, ‘We’ll always have Nigeria.’ ”
On Monday, oil traders reacted to an armed attack on a pumping station in the oil-rich African nation that is one of the main suppliers of crude to the U.S.
That attack, which forced Royal Dutch Shell to reduce its output, combined with surging demand for oil in China, India, Russia and the Middle East.
“I still don’t think we have seen the highs or the lows for oil this year,” said Sean Brodrick, a natural resources analyst for Money and Markets, an investment newsletter. “We could see oil at $150 within the next 12 to 18 months.”
The one ray of hope for motorists is that crude tested the $120 limit repeatedly in recent trading but has yet to close above that psychological benchmark, said Phil Flynn, vice president and senior market analyst for Alaron Trading Corp. in Chicago.
“Investors keep falling back to oil as a hedge against the real estate meltdown” and other poor performing investments, said Flynn, who predicted that oil would climb to at least $125.
In California, the average gasoline price hit $3.903 a gallon, up 1.1 cent, while nationwide the average reached $3.613 a gallon, up 1 cent. The average gas price fell only in the lower Atlantic region -- Florida, Georgia, North Carolina, South Carolina, Virginia and West Virginia -- slipping 0.6 cent to $3.584 a gallon.
High fuel prices are being felt across the nation.
Vacation destinations as diverse as Big Bear Lake, Traverse City in Michigan and Lancaster County in Pennsylvania are offering guests free gasoline cards to help offset their travel costs. The longer the vacation stay, the bigger the gas bonus: $25 for one or two nights at Big Bear, for example, but $100 for a five-night stay.
Automakers were nearing record levels of incentives for the biggest and thirstiest vehicles, said Jesse Toprak, executive director of industry analysis for Edmunds.com. But auto buyers were shifting heavily to smaller SUVs, small cars and hybrid vehicles, according to Autonation.com.
“It’s not driven by gasoline entirely, but customers are looking to get the most value. The losers are vehicles like the Ford Expedition. The winners are vehicles like the Ford Edge,” Autonation spokesman Mark Cannon said.
“The big SUVS are going to be used by people who really need them to tow a trailer or a boat,” he said.
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