Gas Prices Surge as Oil Hits Records

NEW YORK (AP) -- The cost of filling up the family car climbed to a record high Tuesday, adding to the challenges consumers already face with falling home values and rising food prices.

Gas prices at the pump rose overnight to a record national average of $3.2272 a gallon, according to AAA and the Oil Price Information Service. That's a tad higher than the previous record of $3.2265, set last May.

Soaring gas prices worsen the financial plight of consumers already suffering through a downturn in the housing market that has sharply reduced home prices in many markets and limited Americans' ability to tap home equity for spending. Food prices are also on the rise, partly due to rising fuel costs.

"I used to think three bucks a gallon was all I'd pay, but I keep filling up," said Joe Gowans while gassing his Acura SUV in San Francisco one recent afternoon. "You have to use it."

A year ago, rising demand and a string of refinery outages had raised concerns about supplies. Now, the record price of crude oil is the culprit, propelling gas higher although supplies are at 15-year highs.

On Tuesday, light sweet crude for April delivery surged to a new trading record of $109.72 on the New York Mercantile Exchange before retreating after the Energy Department and International Energy Agency cut crude consumption forecasts for this year. Futures settled 85 cents higher at $108.75 a barrel, a new record.

Where gas and oil go from here is anybody's guess. Many analysts expect prices to moderate, while others predict oil could keep rising to $120 a barrel, or higher. And with demand for gas expected to rise as warm weather arrives, analysts say pump prices could spike as high as $3.75 a gallon, regardless of what happens with oil prices. The Energy Department on Tuesday raised its forecast of how high prices will rise this spring by a dime to $3.50 a gallon.

"I've got to say, if they ever go up to $3.50, that would be the point where I'd feel angry," said Alex Magby, a Morrisville, Pa., resident who was filling up his tank near his New Jersey restaurant job one recent afternoon. "I'd feel cheated at that point."

High prices are painful to New York cab drivers like Brandis Younge, who spends $35 to $40 on gas each day.

"Before it skyrocketed, I used to pay $25," Younge said.

Still, because gas is so expensive, analysts expect demand for fuel will rise more slowly this spring and summer than in previous years. Nationwide demand for gasoline is off by about 1 percent over the last 6 weeks, a trend analysts expect to accelerate if prices keep rising.

"We don't go visit family as much," said Steve Bagosy, of Pocono, Pa., while gassing up a company car in Manhattan Tuesday. "Just try to stay local."

The effect can be seen in states such as California, where prices are consistently 30 cents higher than the national average. Last November, the latest month for which data is available, demand for gasoline fell by 3.7 percent from the previous year in California as prices soared past $3.40 a gallon.

"It evokes a real reaction in demand destruction above $3.25 a gallon," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.

Prices have already passed the $4 mark at many stations nationwide. But Kloza thinks slower demand growth will prevent the national average from rising that high.

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