Crude oil touched $100 a barrel for the first time since 2008 today before settling at $98.10 at the close of New York trading on concerns that turmoil in Libya may halt exports.
Economists are concerned that surging prices could adversely affect consumers and possibly devastate an economy that's gaining traction after more than two years in the doldrums.
Daniel O'Connell, vice president of energy at MF Global, said if gas prices continue to accelerate ahead of May, when "driving season" picks up, "it will cripple the economy."
The U.S. weekly average price of gas per gallon rose to $3.19, up 54 cents from a year ago, and slightly higher than last week's $3.14. This was the highest weekly price posted during the month of February since 1990, from available data. The most expensive regions again are New England at $3.23 and California at $3.56.
Crude oil, meanwhile, surged another 5 percent today after rising 9 percent yesterday.
While Libya is a major producer moving about 1.5 million barrels of crude a day into the global market, that just represents about 2 percent of the global consumption of oil. Global supplies and consumption were fairly well balanced before the unrest in North Africa and the Middle East ticked up. Now traders are worried that regime change might crimp production for some time and shake the delicate balance.
Saudi Arabia's oil minister today said his country would try to compensate for a production drop in Libya, also an OPEC member.
O'Connell said if crude oil does reach the brief high of $147 a barrel from July 2008, then the price of gas could also average $4.11 as it did then. In that scenario, he said consumers and retailers would not be able to absorb the higher gas prices as they did three years ago.
However, O'Connell said he does not suspect gas and oil prices to continue to accelerate for very long.
"It's going way up way too fast," said O'Connell.
As protests seemed to subside in Egypt, anti-government unrest continued in Bahrain and Libya. In a speech on Tuesday, defiant Libyan strongman Moammar Gadhafi said he maintains control of the country despite the spread of anti-government protests from the city of Benghazi to the capital, Tripoli, yesterday.
Unlike Egypt and Bahrain, petroleum expert Andrew Lipow, president of Lipow Oil Associates in Houston, said, Libya is a significant exporter of light sweet crude.
Most of that gets exported to Europe: Italy, Germany, France and Spain. So, how does it affect the United States? We import 40 percent of our crude from Europe, refine it, and then export back to them the distillates, including gasoline and diesel. So, any disruption in Europe gets felt in the 50 states.
"You hear that we import a lot of crude," says Lipow. "And yes, we import about 9 million barrels a day. But less than 1 percent of that comes from Libya. What the oil market is worried about now is, we've seen unrest spread throughout the Middle East -- Morocco, Algeria, Tunis, Egypt. What if that should spread to Saudi Arabia, which accounts for 9 percent of the world's supply? They are the supplier of 11 percent of our crude oil. The market is worried about that supply being disrupted."
Oil prices jumped above $93 a barrel in Asia Tuesday amid fears the violent protests in Libya could disrupt crude oil supplies.