With the peak summer driving season just around the corner, the price of oil climbed to US$40 a barrel on Friday and analysts said US motorists should brace for more expensive gasoline in the days ahead.
Spot prices for gasoline have soared between US$0.10 and US$0.25 per gallon over the past week along the West Coast and in the Rocky Mountain region, one market watcher said, and that is almost guaranteed to be passed along at the pump. West Coast retail prices for regular gasoline were already averaging US$2.08 per gallon at the start of the week, according to the Department of Energy.
Oil prices shot up nearly 7 percent in the past week. Traders said they were increasingly worried about the possibility of attacks against petroleum industry targets in the Middle East at a time when supplies are tight and demand is strong.
A government report showing growth in the jobs market also contributed to the run-up on Friday because it bolstered the outlook for the economy, a key driver of fuel consumption.
If current price levels are sustained, analysts said the Organization of Petroleum Exporting Countries, whose leading members meet informally later this month, might need to raise production to soften the impact of high energy prices on the global economy.
Oil for June delivery rose as high as US$40 Friday on the New York Mercantile Exchange before settling at $39.93 -- the highest level in more than 13 years. The Nymex briefly posted trades as high as US$40.05 before discovering a mistake and removing them, one trader said.
The last time the front-month futures contract settled above US$40 was on Oct. 11, 1990, when oil was valued at US$40.42 per barrel leading up to the Persian Gulf War. In today's dollars, adjusting for inflation, that would be equivalent to US$56.83, according to the Energy Department.
Oil has been trading above US$30 a barrel since late last year and the pump price of gasoline has been at a record-high, not adjusting for inflation, for weeks.
Gasoline supplies are expected to be tight this summer because of strong demand, limited domestic refining capacity and regulations that require more than a dozen different blends of cleaner-burning gasoline. The West Coast, where prices are highest, has some of the most stringent requirements.
In the Energy Department's latest survey, the average nationwide price of unleaded gasoline was US$1.84 per gallon. That's still less expensive than in 1981 when, in today's dollars, prices approached US$3 a gallon.
However, analysts expect pump prices to rise further in coming weeks because of the rising wholesale cost of gasoline. Nymex-traded gasoline futures rose US$0.027 Friday to US$1.34 per gallon -- the highest level on record since the contract started trading in December 1984.
In other Nymex trading, natural gas for June delivery rose US$0.075 to US$6.294 per 1,000 cubic feet and heating oil futures gained 1.19 cent to US$1.0164 per gallon.
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