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Oil Prices Shoot Higher, Gas Prices Follow

National average climbs to $2.467 per gallon

By Mark Huffman
ConsumerAffairs.com

May 29, 2009
It's starting to look a bit like the bad old days of 2008, when a triple digit oil surge produced crushing prices as the gas pump. Oil prices gushed past the $65 a barrel mark Thursday as gas prices continued to climb as well.

“The significance of $60 per barrel oil, it should be noted, is largely psychological and doesn’t represent a market tipping point or other key indicator,” said Andrew Delmege, Manager, AAA Regulatory Affairs.

As they start the first full weekend of “unofficial” summer, motorists are paying a national average $2.467 a gallon at the pump, up more than six cents from last Friday, according to AAA. That's up 41 cents a gallon in the last month, but still well below last year's average price of $3.952.

Alaska has the most expensive gas in the nation with an average price of $2.747 a gallon. Georgia has the cheapest gas, with an average price of $2.314. The average price in California is $2.701 a gallon. In New York the average price is $2.60.

Analysts say oil traders have pushed crude oil prices higher on the futures market, much as they did last year, when crude futures topped out at $147 a barrel. Then, traders were betting that global economic growth would created supply shortages.

Instead, the U.S. consumer, faced with $4 a gallon gas at the pump, stopped spending, helping to push the U.S. economy into a steep recession. Gas prices finally bottomed around $1.65 a gallon while oil prices fell into the $35 a barrel range for a time.

Since then, OPEC has reduced production to try and push prices back to the $80 a barrel range. Oil traders, sensing that the economy is improving and demand for energy will increase, have been betting on more expensive oil, helping drive up the price.

The U.S. Energy Information Administration reported Thursday that U.S. crude oil supplies fell again last week, dropping by 5.4 million barrels. Even so, oil inventories remain at a 19-year high, meaning there is anything but a shortage.

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