NEW YORK -- Gasoline prices have set a record at the pump, surging to a record national average of $3.2272 a . Oil prices, meanwhile, surged to higher than $108 to a new inflation-adjusted record and their fifth high in six sessions on an upbeat report on wholesale inventories.
The national average price of a gallon of gas rose 0.7 cent overnight to $3.222 a gallon, 69 cents higher than one year ago, according to AAA and the Oil Price Information Service. In May, prices peaked at $3.227 as surging demand and a string of refinery outages raised concerns about supplies.
AAA of Northern California said last week Modesto had hit a record high, with an average of $3.48 a gallon for regular unleaded gasoline, and several other cities, including Fresno, Sacramento and Stockton, also hit record highs in the last week.
With the busier summer driving season months away, AAA officials warned further record highs could be on the way. Analysts at the federal level have said gas at $4 a gallon is unlikely but have not ruled it out.
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Modestogasprices.com listed an average of $3.48 a gallon in Modesto on Monday, down from $3.50 on Sunday but higher than $3.43 a gallon a week earlier.
In its last forecast, released last month, the Energy Department said prices nationally likely will peak around $3.40 a gallon this spring; a new forecast is due today.
Retail gas prices are following crude oil, which has jumped 25 percent in a month. On Monday, crude prices surged to another record after the Commerce Department said wholesale sales jumped by 2.7 percent in January, their biggest increase in four years, according to Dow Jones Newswires.
The strong sales report suggested to oil traders that the struggling economy may be doing better than was thought.
Light, sweet crude for April delivery rose $2.75 to settle at $107.90 on the New York Mercantile Exchange after earlier setting a new trading record of $108.21.
Energy investors shrugged off a relative stabilization of the dollar and a cooling in tensions between Venezuela and its neighbors Colombia and Ecuador.
Many analysts believe speculative investing attracted by the weak dollar is the primary reason oil has risen so far so fast in recent months. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.
"We've got a Fed(eral Reserve) meeting on the 18th that could see a sizable rate cut," said Brad Samples, an analyst with Summit Energy Services Inc., in Louisville, Ky. "So, it's not over."
Indeed, while the dollar rose against the euro Monday, many investors believe the greenback is likely to keep falling as the Fed continues to cut rates. Many analysts believe the rise in crude prices is not supported by the market's underlying fundamentals, noting that supplies are generally rising while demand is falling.
"By gobbling up everything in sight, (investors) are pushing food and fuel prices to ruinously high levels," said Peter Beutel, president of the energy risk management firm Cameron Hanover, in a research note.
Investors shrugged off a weekend cooling of tensions in South America, where Venezuela said Sunday it was restoring diplomatic ties with Colombia after they were broken off after a cross-border Colombian attack on a leftist rebel camp in Ecuador.
Last week, rebels shut down a Colombian oil pipeline in retaliation for the Colombian raid into Ecuador. Venezuela threatened to slash trade and nationalize Colombian-owned businesses, and Venezuela and Ecuador briefly sent troops to their borders with Colombia.
The potential for conflict involving Venezuela, a member of the Organization of the Petroleum Exporting Countries and a major U.S. oil supplier, helped push oil higher last week.
"The Venezuelan production was at risk there," Samples said.
Other energy futures rose Monday: April heating, 2.64 cents to settle at $2.9734 a gallon; April gasoline, 2.06 cents to settle at $2.7149 a gallon.
April natural gas futures jumped 25.5 cents to $10.024 per 1,000 cubic feet, the first time a natural gas contract has closed at higher than $10 since January 2006. Natural gas was following oil higher but also rising in anticipation of cooler temperatures across the Midwest and Northeast, analysts said.