Transcripts

Gasoline Futures Rise Right Along With Pump Prices

SUSIE GHARIB: More sticker shock at the gas pump could be coming for American consumers. Gasoline futures hit an all-time high in New York trading today, $1.18 a gallon, their highest price in 20 years. The reason behind the big jump: a surge in the price of crude oil, which closed in on the $38-a-barrel level. Erika Miller takes a look at factors behind the record prices.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Trading was frenzied at the New York Mercantile Exchange as gasoline futures closed at their highest level of all time. The reason? Rising crude prices, which hit a fresh three-week high in the neighboring pit. Traders blame new concerns about a disruption in Middle East oil supplies. Now that Iraqi insurgents have threatened to kill hostages, some traders say damage to oil fields could be next.

FADEL GHEIT, OIL ANALYST, OPPENHEIMER & CO.: Every time you look at the television or you look in the newspaper, you see the gory scenes from Iraq. And all these scenes carry the message that there could be a wide spread of the violence throughout the Middle East and that could ultimately disrupt supply. And that is what the fear is all about.

MILLER: Since the Merc was closed for a holiday Friday, traders had their first chance to react to a report on Friday that demand for oil is expected to be unusually high in the coming months. In that report, the International Energy Agency raised its estimate of the oil that OPEC will need to provide in the second quarter to meet world demand. The IEA says demand will likely be at its highest level in three years as a result of economic recovery in China. That forecast comes at a time when OPEC has pledged to reduce its output by a million barrels a day starting this month.

SCOTT HESS, OIL TRADER, G&H COMMODITIES: That is certainly an underlying factor. And as long as the various OPEC producers adhere to their quotas and don't cheat, then prices should remain quite high.

MILLER: Hess is predicting crude oil will surge to at least $40 a barrel, and he expects gasoline futures to easily rise above $1.20 a gallon. Adding to price pressures is tight refining capacity around the country. Plus, many states have tougher environmental standards for fuel, which adds to production costs. Prices at the pump have already hit a record average of $1.80 a gallon for self-service regular, according to the Lundberg Survey, and some experts say that price should rise at least $0.25 cents a gallon more. Erika Miller, NIGHTLY BUSINESS REPORT, New York.