The average price of gasoline hit $3.68 per gallon, said the Department of Energy this afternoon, up 86 cents from a year ago and nine cents from a week ago. The last time gas rose higher than $3.50 was Sept. 29, 2008, when the weekly average hit $3.64.
Analysts said markets were reacting to continuing instability in the Middle East. On trading markets, oil prices returned today to their highest levels since September 2008, settling at $108.47.
Robert Powell, senior analyst with The Economist Intelligence Unit, said oil markets are always skittish about Middle East news. Libyan rebels took hold of a strategic oil town, Brega, over seven weeks after protests against the Gadhaif regime began on Feb. 15.
Powell estimates in his forecast that oil will below $100 a barrel after the third quarter, and gas prices will also decrease.
"There's no need to be too alarmed," he said. "Oil markets are notoriously volatile anyway. So do not panic about daily movements. The key is to monitor trends."
Powell said oil will reach below $100 a barrel despite increasing demand from the U.S. An improved unemployment rate, 8.8 percent, may indicate higher demand from companies and consumers with jobs.
Higher demand and limited oil supplies could lead to higher prices, according to the rules of supply and demand.
Daniel O'Connell, VP of Energy, said he disagrees and anticipates an expensive driving season.
"I only see it getting worse," O'Connell said. "If positive economic employment reports even stay the same, we will be looking at all time highs in the summer. May want to start window shopping for a good bicycle."
Shelley Goldberg, director, global resources and commodities strategy of Roubini Global Economics, said she also does not see an improvement in the picture for oil and gas prices in the near future.
She said it is possible that the price of oil will continue to increase to price levels of $120 a barrel and even higher. But these levels would not be sustainable because "demand destruction" would ensue. She said we would likely see "demand destruction" at lower oil levels than during the period of astronomical prices of summer 2008. It was then, in July 2008, that oil reached $148 a barrel and the national weekly average gas price was $4.05 a gallon for regular.
This year, there are at least four factors that make us more vulnerable to demand destruction than in 2008, said Goldberg. These include European sovereign debt issues, a higher unemployment rate, a "double-dip" in the housing market, state and municipal debt concerns and overheated emerging markets.
"So the sensitivity to oil is greater now than 2008," Goldberg said. "And you're seeing that the situation in the Middle East and other nations is not going away soon."
Goldberg said unrest in other nations, such as Yemen, Oman, Bahrain, Iraq and Jordan, also indicates that there is no near end to volatility in the oil markets.
"There's unrest on almost every border," Goldberg said.
Goldberg said "peaceful and amicable regime changes" in some of these nations is one scenario that could lead to a less volatile oil market and lower oil prices.
"We don't envision that ideal scenario coming to fruition in the near term," Goldberg said. "I anticipate continued fear of supply disruption globally."