Gas prices soar 2 cents overnight to $3.53
Prices at the pump are nearly 68 cents higher than a year ago
Gasoline prices shot higher at the pump Wednesday, rising more than 2 cents overnight to a national average of $3.53 a gallon. Gas also reached new records in the futures market after an Energy Department report raised new questions about fuel supplies.
Oil prices, meanwhile, fluctuated after the department’s Energy Information Administration said crude stockpiles grew last week; the news alleviated some of the market’s recent concerns about tight supplies.
Gasoline inventories fell by 3.2 million barrels last week, about a million barrels more than expected, the EIA said. Gas supplies have been falling lately, raising concerns about fuel supply levels as peak summer driving season approaches.
“It’s just a sense that summer driving’s here,” and supplies are falling, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
That pointed to a continuation of gasoline’s prolonged climb at filling stations around the country.
The national average price of a gallon of regular gas rose 2.2 cents Wednesday to a new record of $3.533, according to a survey of stations by AAA and the Oil Price Information Service. Diesel, the fuel used by trucks, trains and ships, rose to its own new record of $4.214 a gallon.
Gas prices are nearly 68 cents higher than a year ago, and many forecasters believe they could spike as high as $4 a gallon nationally over the next couple of months. Prices are already above $4 a gallon in parts of the country, including California, where the state average reached nearly $3.87 a gallon Wednesday.
The price consumers pay at the pump is determined in part by what happens in the gasoline futures market. And those prices kept rising Wednesday, with the May contract rising to a new trading high of $3.0379 a gallon before retreating to trade up 1.61 cents at $3.0325 a gallon on the New York Mercantile Exchange.
Gas is also affected by crude futures, which waffled after the EIA said crude supplies rose more than expected last week. Light, sweet crude for June delivery fell 9 cents to $117.98 a barrel. On Tuesday, May crude futures rose to a trading record of $119.90 as investors scrambled to square positions before the contract expired. At the moment, June crude does not face the same pressure to rise, though many forecasters predict prices could eventually breach the $120 level.
The dollar, which has contributed to crude oil’s sharp rise in recent months, strengthened Wednesday, making commodities such as oil less attractive as a hedge against inflation. Also, a stronger dollar makes oil more expensive to investors overseas.
The EIA said supplies of distillate fuel, which includes diesel and heating oil, fell more than expected last week. But refinery activity jumped, signaling that gasoline, diesel and heating oil supplies might not remain low for long.
“The big 4.2 percent jump in the refinery operating rate ... does promise more output in the weeks ahead,” said Tim Evans, an analyst at Citigroup Inc., in New York, in a research note.
Rising supplies could offer consumers some relief at the pump. Although gas prices have been following futures higher, they are also responding to supply shortages. In the spring, refiners try to sell all of their winter grade gasoline before selling the less polluting, but more expensive fuel they’re required to offer during the summer months. That transition tends to pull supplies lower. Prices are also rising due to short supplies of alkylate, an additive necessary to the production of summer grade gas.
Analysts also say refiners have cut gasoline production in recent weeks due to low profit margins. Refiners have to buy the crude they turn into fuel, but with demand for gasoline falling, they have been unable to raise gas prices fast enough to keep up with soaring crude prices.
High prices have cut demand for gasoline by 0.5 percent, on average, over the last four weeks compared to the same period last year, EIA data show.
In other Nymex trading Wednesday, May heating oil futures fell 0.72 cent to $3.3097 a gallon while May natural gas futures rose 19.8 cents to $10.805 per 1,000 cubic feet.
In London, June Brent crude futures rose 23 cents to $116.18 a barrel on the ICE Futures exchange.
