Analysts expect gasoline prices to rise soon

NEW YORK -- Analysts say gasoline prices are about to start rising again, following crude oil's recent record-breaking run.

Gasoline prices have so far held steady or fallen despite a rally that has boosted crude oil to records in each of the last eight trading sessions on the New York Mercantile Exchange.

"That's over now," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. "From now on, every $1-a-barrel advance in crude has to be accompanied by a 2 1/2-cent increase in gas prices."

Oil's advance has been driven by a combination of the Federal Reserve's half-point interest rate cut, the falling dollar and concerns that tropical storms would strike key oil and gas installations in the Gulf of Mexico.

Interest rates and their role in pulling the dollar lower are drawing fresh investment dollars into energy markets, analysts say. Because oil and other commodities are priced in dollars, they still appear cheaper to overseas investors, whose currencies have strengthened against the dollar.

Despite Friday's drop in crude oil prices, many analysts expect oil to continue rising in the near term.

"What interest rates were placed at ... is the key to oil prices going higher," said James Cordier, president of Liberty Trading Group in Tampa

As oil has risen, the spread between what many retailers pay for their gasoline and what they charge consumers has shrunk substantially, or even reversed in some cases.

"The people who actually sell the gasoline are really, really suffering," Kloza said.

Retail gas prices in many areas are already a nickel behind where they would need to be to allow retailers to turn a profit, Kloza estimated. Gas prices will likely rise an average of 10 cents to 15 cents a gallon nationwide over the next couple of weeks, Cordier said.

Overnight, the average price of a gallon of gas rose 0.6 cent to $2.797 Friday, according to AAA and OPIS.

Meanwhile, light, sweet crude for November delivery fell 90 cents to $80.88 a barrel on the New York Mercantile Exchange after rising as high as $82.40 earlier. November crude became the near-term contract after the October contract expired Thursday at a record close of $83.32. Prices reached $83.90 in intraday trading, also a record.