Gas tops $3.83 as early holiday travelers hit road

NEW YORK — Americans getting an early start on the Memorial Day weekend found that gasoline prices again sprinted to a new record high overnight, reaching a national average above $3.83 a gallon. Some analysts predict gas will break past $4 as early as next week.

Oil prices, meanwhile, fell Thursday after setting a new trading record of $135.09 overnight. A stronger dollar gave some investors reason to sell oil futures to lock in profits from crude's record run. But concerns about falling supplies and rising demand are expected to keep propelling prices higher in the days and weeks to come.

Oil's surge is contributing directly to the pain consumers feel every time they fill up. At the pump, the average national price of a gallon of regular gas rose 2.4 cents overnight to $3.831, according to a survey of stations by AAA and the Oil Price Information Service. Prices are 61 cents higher than a year ago.

Unlike last year, oil prices are setting new record highs on a daily basis. That's pushing gas prices higher, and analysts see no reason for gas not to follow.

"We're going to blast past $4," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

Prices may rise as high as $3.90 on a national basis by this weekend, he said. Prices are already above $4 a gallon at many stations around the country, and are averaging more than $4 in California, New York and Illinois, among other states.

Oil prices rose to $135.09 a barrel in overnight electronic trading on the New York Mercantile Exchange before retreating to settle down $2.36 at $130.81 a barrel by afternoon in New York.

Analysts said oil futures are caught between the supply and demand concerns that boosted crude to its latest record, and a desire by some investors to cash in some profits. The dollar, one of the factors that has fed oil's rally from about $65 a year ago, strengthened against the euro Thursday. When the greenback gains ground, commodities such as oil lose their value as hedges against inflation. Also, a stronger dollar makes oil more expensive to investors overseas.

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At times in a price runup that's added nearly $9 to a price of crude this week, and almost $16 over the past month, investors will sell to take profits, analysts said. Crude rose $4.19 a barrel on Wednesday alone.

The Paris-based International Energy Agency on Thursday said it is worried about whether there is enough oil to meet global demand, and is working on a review of the world's 400 largest oil fields that could lead to a major revision in its closely-watched forecasts.

"The market is really structurally tight ... oil demand is not growing that fast but supply is constrained," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Some analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal after last week's earthquake, Kevin Norrish, an analyst with Barclays Capital PLC, said new data from China shows demand for diesel was already rising quickly before the disaster. Chinese diesel imports rose 9.2 percent in April compared to last year, Norrish wrote.

Still, many analysts argue that oil prices have risen far beyond levels that can be justified by supply and demand. This school of thought believes the dollar's decline has attracted speculators to oil and other commodities, artificially inflating prices. Some analysts see signs in the prices differences between the current July crude contract and contracts for delivery in future months that could mean oil prices are set to decline in coming months.

In other Nymex trading Thursday, June heating oil futures rose 4.59 cents to settle at a record $3.9543 a gallon after earlier rising to a trading record of $4.0153. Heating oil, which is closely related to diesel, is often traded as a proxy for diesel.

June gasoline futures fell 6.68 cents to settle at $3.3297 a gallon after rising earlier to their own trading record of $3.438. June natural gas futures rose 5.7 cents to settle at $11.697 per 1,000 cubic feet. The Energy Department said natural gas inventories rose last week by 85 billion cubic feet, in line with analyst estimates.

In London, July Brent crude futures fell $2.19 to settle at $130.51 a barrel on the ICE Futures Exchange.

___

Associated Press Writer Pablo Gorondi in Budapest and AP Business Writer Thomas Hogue in Bangkok, Thailand, contributed to this report.

Comments

[Rule Of Law]

And another site for those who prefer to actually think about this issue rather than be told by others what to think;

http://tpmcafe.talkingpointsmemo.com/2008/05/14/speculation_oil_prices/

[Rule Of Law]

I read somewhere that the more this is posted the truer it gets--so here it is again with a few additions: everyone concerned about this completely unfounded runaway oil pricing should read this:

"There"s a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." " National Gas Week, Sept. 5, 2005

Full story here:

http://www.star-telegram.com/ed_wallace/story/651928.html

And these--

http://globalresearch.ca/index.php?context=va&aid=8878

http://globalresearch.ca/index.php?context=va&aid=9042

Thanks to vippy for bringing this to light.

[gonavy]

Appraching? We have past $4. This reporting of the national average does nothing for California or Hawaii. We cut down our driving significantly a year ago and it is still killing us.

[fourex]

Reuters 5/23/08
"Oil prices have climbed by around a third since the start of the year, driven upwards by worries about supply from non-OPEC producers and the weakening dollar which prompted investors to use oil as a hedge against the falling currency."

I believe this paragraph hits all three catalysts for the recent rise in prices, non OPEC supply, falling dollar, speculative hedging.

[Mogamboguru]

You ain't seen nothing yet!

As of today, in GERMANY Regular and Diesel cost 8.50 Dollars per Gallon, and Premium costs 8.60 Dollars per Gallon. How do I know? I am german and I live in Germany. That's how.

On the other hand, a large part of all new cars being sold in Germany these days have an AVERAGE mileage of 40 mpg OR BETTER.

Could it be that, US-customers are barking at the wrong trees?

Worldwide, the "Always-Ch­eap-Fuel-F­or-Everybo­dy"-party is definitely over. And you are welcome to the real (expensive) World, too, dear american car drivers.

[Calylily]

Why can't SOMEONE do SOMETHING about this?

Where is our President and Chief when we need him?

Can't everyone stop talking stupid, and get a handle on this?!?! This . . . is no longer funny!

Can't afford the gas, won't be able to get to work - see you under a park bench!

[gonavy]

There is NOTHING to be done about it. Oil is a nonrenewable resource. Read up on "Peak Oil" and buy energy mutual funds to help off set the costs.

[TxAggie]

Yes Calylily- we can develop our own resources and cut down on imported oil. It will help our economy and stay off higher prices. Raise hell with your cowardly elected officials. Our president has tried to open up access to federal lands, it is Congress that won't do a damn thing but drag in the Oil Co execs and make a show for the camera when they are the fools that have pur us in this predicament.

[fourex]

April 24 (Reuters) - Soaring international crude oil prices are driven by a range of factors including speculation and depreciation of the U.S. dollar, not mainly by China demand, an executive with Saudi Aramco said on Thursday.

"It's a mistake to attribute either the recent run-up in crude oil prices or continued market volatility solely to rising Chinese demand," Mohammed S. Al-Madi, regional vice president of Saudi Aramco in Beijing, told an industry conference.

He said a massive influx of speculative money into the oil futures markets, the weak dollar and tight capacities all along the petroleum value chain all contributed to the surges in prices.

[vippy]

China is using 3.5 % less this year so why did the price of crude oil rise then? The falling dollar has little to do with it since the Europeans pay the same for the oil than we do. Gosh, can't anyone think strraight. These people on TV lie to us and we take it for granted. Under the Bush Regime
we have had much more oil in reserve than ever before yet when it dips the price rises for the whole world, odd isn't it. When a hurricane is approaching our oil rises and the whole world is
paying for the higher cost. Congress knows the problem but does nothing and they put on this
dog and pony show just to deceive us. Prof. Michael Greenberger, a former board member of the
Commodities Trading Commission, testified in front of the House Committet on Energy on December 14 of last year. Under discussion that day was the manipulation of the enrgy markets and prices and he advised them that in a few months they would have to have a hearing on the
subprime meltdown for the very same legislation (DEREGULATING ENERGY) deregulating
something called collaterialized debt obligations (CDOs). That legislation is directly responsible
for the mortgage meltdown to the high price of energy today. Congress KNOWS THIS AND
DOES NOTHING - why, because they are invested in it.

[Rule Of Law]

Vippy, I see you get no snappy rebuttal to this one....Hmmm--maybe becuz there ain't one?

[mamacat]

The following is a matter of historical record, with a bias against some of our largest corporations.

Some seem to think that it is an accident, or just circumstantial, that we rely so heavily on cars for interurban transportation in this country. It is not.

In the mid 20th century, several American corporations, chief among them Standard Oil (parent of Exxon Mobil and Chevron), General Motors, and Firestone, formed a subsidiary corporation named "National City Lines" (NCL). What NCL did, was create a market for oil, cars, and rubber, the products of the parent corporations, by buying out over 50 of our nations metropolitan light-rail mass transit systems, and shutting them down. Would S.O, GM, and Firestone have been serving their stockholders' interests by investing so heavily in a competing industry, unless they planned from the start to increase the market for their own products?

I would love to see a movie made about this sham of a "free market" that allows corporations to act so blatantly against the public interest. I remember the light rail system that used to operate where I lived. It was one of the largest in the whole world, but now it has evaporated from most people's memory.

[KillTheMessenger]

But how does that affect your free will to drive a Prius instead of a Highlander? Or did NCL put something into the water supply, too, that forces everyone to buy a larger car than they need?

[MetalCanuck]

Inflation folks, America is broke. There will be no healthcare and you should have listened to Ron PAul but instead there are CFR losers running to win now and there will be more corruption.

[Rule Of Law]

I'm reposting this at the top of the coments, as everyone concerned about this completely unfounded runaway oil pricing should read this:

"There"s a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." " National Gas Week, Sept. 5, 2005

Full story here:

http://www.star-telegram.com/ed_wallace/story/651928.html

Thanks to vippy for bringing this to light.

[KillTheMessenger]

The more often you repeat it, the truer it gets. :-)

[MacTheBlogger]

Well, let's see. The probable reason for the current spike in gas prices is...

A. A perfect storm, a combination of (a) the current weakness of the dollar, (b) an explosion of global demand, led by massive increases from China & India, (c) supply restrictions in America, (d) hyperactivity in the speculative commodities markets, exacerbated by a struggling economy temporarily taking money away from stocks and towards commodities, (e) resource/capital challenges faced by drilling and processing companies, and (f) refining capacities stretched to and beyond their limits due to demand;

= OR =

B. Those evil rich greedy guys who are really, really mean!

Hmm. As compelling, mature, aware and well-thought-out the B argument is, I think I'll pop out on a limb and go with A. I strongly suspect I'm in the minority here.

[wolf58]

The gross profits by the oil companies shoot holes in your theory. If that were fact then their profit would only be flat or small and not the margins we have seen quarter after quarter. You sound like an oil man or at least an oil investor.

Did you know that the US exports 1.083 million barrels a day?
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html#Econ

makes you wonder

[MacTheBlogger]

An oil company's gross profits are not affected by the dollar or global demand or the commodities markets or supply restrictions or refining capacities. Net profits are typically 4% to 5%, far below those of the rest of the S&P 500.

What do you want? Zero profit margin for oil companies might drop the price at the pump down to $3.60 a gallon. So?

The problem is not the evil rich greedy guys. This is our own fault. This country has done virtually nothing to make itself energy-independent. Meanwhile both parties point their finger at the other. A pox on both houses.

The good news is, we now seem to be awake. Smaller vehicles, better gas mileage, and more aggressive energy policies are now on the way. It's about time.

[ajax2]

mactheblogger there are some holes in your statements, but this one is easy,
'(f) refining capacities stretched to and beyond their limits due to demand;'

I recently read that the U.S. is at 85% refining capacity, and the oil corps refuse to build more.

[MacTheBlogger]

Refiners cannot ever to 100% capacity due to the regular stuff: constant maintenance, regular retooling/stoppages as different grades and kinds of fuel must be produced based on environmental laws, seasons of the year, etc.

It sure as hell would be nice if they could all operate at 100%, but it'll never happen.

[vippy]

Disagree, a) has nothing to do with it. We drill in Alaska and are selling the oil to Japan.
In TX and OK oil well owners can only pump 500 gal a month and get paid for not pumping
by the government much like the farmers to for not producing. Iran is storing their oil offshore
because they ran out of storage facilities. We are swimming in oil and our refineries are only
operating at 86% capacity and claiming they are not making any money! China is using
less oil by 3.5%. But our prices are steadily rising. 2 refineries are closed. Just does not make
sense what they explain in the news, circumventing the real problem. Why did Bush send out
the stimulus checks yet reigning in the hedge funds and future's market would have rectified
the problem?

[wolf58]

The only ones that will make big oil drop prices is us.
Pick one company and boycott it for a year
watch what will happen then.

BOYCOTT ALL EXXON MOBIL PRODUCTS

Its the New Boston Tea Party

[KillTheMessenger]

Let us know how that works for you. And watch how the price of oil will drop because you are buying from Shell rather than from Exxon.

[marijam]

I guess its time to think seriously about getting a 50 mile per gallon hybrid in order to survive financially. I commute a total of 172 miles a day, five days a week. I'm not going to rent an apartment where I work. I have a home and a husband who works in the community where we live. There isn't any form of mass transit that would come anywhere near to meeting my needs.

[bluesnot]

You have choices. Get the apartment close to work, get a job close to home, buy a hybrid or pay a lot for gas.

[KillTheMessenger]

If I were you I would move. The quality of life issue would beat the cost issue for me. 172 miles on the road means you are wasting 172 miles of your life, which must be close to three hours a day, right? I did something similar years ago: almost five hours every day on public transportation to get to work and back. After seven months I had enough... I changed jobs and I moved. I lost some money but I got my life back. More than that, actually. Much, much more. I am a lucky man ever since.

[loki]

I watched some of the hearing with oil executives. Of course as usual, they are not under oath, which is just wrong, but since they pretty much control congress and the white house, they can do as they please.
But what really caught me was that they finally told the truth, and it was during the confrontation a with Congresswoman when the Oil executive told her that prices would only drop IF they were allowed to drill in Alaska. The bulk of this is about blackmail, extortion of the US public to get their way. Add that to the stupid speculation that raises prices for no real reasons at all, and the profits being made from all of this, and of course the more oil China and India uses, and you have our mess we have today. But it seems that the 40 billion + profits that really drive these high prices, are mostly extortion fees. If almost anyone else did this, they would be arrested and tried for blackmail, fraud, and more. But not when your the richest and most powerful industry in the world. They have us by the proverbial balls, and literally by the wallet. There is more oil that they pretend, and I base that on the fact i personally know a Geophysicists who works for Mobile and I will take his word over a CEOs or so called Economist any day.

[KillTheMessenger]

If you put them under oath they will bring their attorneys who will say to every question that "Mr. X exercises his the fifth amendment rights.". And that would be it.

The whole thing is a political game show and everybody knows it. There is no legal handle against anything the oil companies are doing. They are operating fairly and squarely within the legal parameters of our system. Now, you could ask the question who gave them these lax laws to work with... and that would be the same people who are running the political game show.

[marijam]

If they want to help us they should make oil speculation against the law. While they are at, throw the commodities in too.

Any domestic increase in oil production would only go on the global market with its insatiable demand and would, therefore, not lower the price.

[bluesnot]

Our government needs to protect the American people from this kind of extortion by demanding much higher fuel efficiency, by creating mass transit systems and by seriously investing in alternative energy. The American people need to do their part by drastically cutting their consumption.

[TxAggie]

Obviously you did not watch enough of the hearing. First of all they were sworn in. Time and time again when asked to predict the market- the execs could not. They did think more supply would effect price but could not predict it (nor can anyone else whenyou are dealing with a cartel). The whole thing was nothing more than a witch hunt- the politicians were taking the opportunity to grandstand and make rediculous statements (Durbin, Fiengold, Feintsein, the bug eyed guy from Vermont to name a few). The execs pleas for our gov't to open areas in the US for drilling is not extortion it is the same plea industry has been making the last 20 years (where have you been?). I am glad you know a geophysicist at ExxonMobil and I agree, there is more oil out there. They problem is we cannot drill for it thanks to our spineless ploiticians.

[Rule Of Law]

Another poster put this up but I'm moving it to the front because it looks at speculation in a way that makes real sense.

http://www.star-telegram.com/ed_wallace/story/651928.html

[KillTheMessenger]

If it is based on speculation... how can it make sense? Wouldn't a piece based on facts make more sense? :-)

[RoloTomassi]

It is based on facts, you lying, corporatist cretin.

[bluesnot]

Supply and demand. Seems like the oil producers have every right to stockpile. Too bad more consumers don't counter by using their right to cut back consumption.