TOPICS > Economy

Costs at the Pump Reach Record as Oil Prices Soar

BY Admin  March 11, 2008 at 3:20 PM EDT

Woman pumping gas; AP file photo

Average regular gasoline prices touched an all-time high of $3.227 per gallon, up 27 cents in a month, travel group AAA said in its daily survey of more than 85,000 self-serve filling stations. That surpasses the previous record of $3.2265 set last May.

AAA said it expected pump prices to rise further in the coming months, surpassing $4 a gallon in some areas by summer when road travel typically peaks, the Associated Press reported.

Prices have already passed the $4 mark at some stations. On Tuesday, the average price of a gallon of gas in California stood at $3.581.

Also Tuesday, light sweet crude for April delivery climbed to a new record of $109.72 on the New York Mercantile Exchange. The price then fell after the International Energy Agency cut its forecasts for crude consumption this year and the U.S. Federal Reserve and other central banks announced a liquidity injection of $200 billion to loosen up financial markets.

The Fed action boosted stocks and helped the dollar rally.

“Oil is definitely reacting to the reversal of the dollar, on coordinated central bank liquidity action,” Tom Bentz, analyst at BNP Paribas Commodity Futures Inc., told Reuters.

According to the Wall Street Journal, the IEA said the Organization of Petroleum Exporting Countries’ decision last week to maintain its existing production rate — rather than increase output — and to not hold a new meeting until September helped create speculation in global oil markets.

“While the latest output decision does not totally ignore price, the decision not to meet until September increases concern that there is no room for stronger demand or delays in non-OPEC production. That by itself provides fertile ground for speculation,” the IEA said, according to the Journal. “The market is concerned that producers are more inclined to react to price declines than price rises.”

Amid the recent economic slowdown, energy costs appear to top consumer anxieties about the economy.

“I’ve got to say, if they ever go up to $3.50, that would be the point where I’d feel angry,” Alex Magby, a Morrisville, Pa., resident who was gassing up near his New Jersey restaurant job told the AP. “I’d feel cheated at that point.”

A poll conducted by the Pew Center for People and the Press in early February found that when Americans were asked what worries them most among several economic issues, 35 percent said rising gasoline prices, followed by 28 percent who named health care costs.

The survey also found that 58 percent said their incomes are falling behind the rising cost of living, a jump from 44 percent who expressed this view in September.

The White House said soaring oil prices are “not going to be solved overnight” and that “it would be wrong” of President Bush to promise otherwise. On Air Force One, Press Secretary Dana
Perino said the record-high oil prices are something “we’re all going to have to work through,” according to news agencies.