National Average For Gallon Of Gas Pushes Above $4

NEW YORK (AP) – Retail gas prices rose further above a national average of $4 Monday, and are likely to keep rising as distributors and retailers hike prices in response to last week’s unprecedented oil price rally.

Oil futures, meanwhile, retreated as investors sold to lock in profits from the run-up, though oil prices may be headed even higher. Saudi Arabia said it would call for a meeting to discuss crude prices, which it said were unjustifiably high.

At the pump, the national average price of a gallon of regular gas rose 1.8 cents overnight to a record $4.023, according to AAA and the Oil Price Information Service. Prices first moved above $4 nationally on Sunday, though they’ve been higher than that in many parts of the country for weeks.

If oil prices remain near $139 a barrel, last week’s record high, gas prices will likely rise another dime in coming days, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.

“The numbers do have some catching up to do,” Kloza said. “There’s a bit of a tape delay that happens with gasoline.”

AAA spokesman Geoff Sundstrom thinks prices could rise another 2 to 3 cents.

Consumers are cutting back on their consumption of gas in response to the high prices, but gasoline producers have little choice but to keep raising prices when the cost of their chief raw material – crude oil – rises. Friday’s jump of nearly $11 in oil prices put new life into gas prices, which had appeared to be topping out.

High fuel prices are also causing a shift in consumers’ car-buying habits; General Motors Corp. announced plans last week to close four pickup truck and SUV plants, saying high fuel prices have cut sales. At today’s prices, it costs nearly $91 to fill a Ford Explorer, up from $70 a year ago. At 14 miles per gallon in city driving conditions, and 20 mpg on the highway, a person who drives that Explorer 25 to 40 miles to and from work – not to mention chauffeuring kids around – has to gas up a couple of times a week, at least.

At $150 a barrel – the Morgan Stanley price prediction that helped ignite Friday’s oil rally – gas would cost about $4.40 a gallon, Kloza said.

Gas prices often peak around Memorial Day, then retreat over the course of the summer. But this is far from a normal year. Oil prices have been marching steadily higher since last fall, and occasional price corrections of $10, or more, have been followed by rapid rebounds to new heights. Last week, oil prices rose nearly 14 percent in two days, trading as high as $139.12 a barrel, after slumping more than $13 from a previous record high.

On Monday, light, sweet crude for July delivery fell $2.39 to $136.15 a barrel in volatile trading on the New York Mercantile Exchange.

“There’s some profit taking going on, which is understandable after that sort of move,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.

On Monday, Saudi Arabia said it will call for a meeting of oil producing countries and consumers to discuss soaring oil prices. Information and Culture Minister Iyad Madani said the kingdom will work with OPEC to “guarantee the availability of oil supplies now and in the future.” He also said the current price of oil is unjustified.

One of the factors that underpinned Friday’s rally – an Israeli cabinet minister’s comment that his nation might attack Iran if it didn’t halt its nuclear program – appeared to dissipate over the weekend as Israeli Prime Minister Ehud Olmert distanced himself from the comments and other officials noted that the minister, Transportation Minister Shaul Mofaz, had not been expressing official government policy.

But other factors support high oil prices. An explosion last week at a natural gas production facility in Australia has boosted demand for diesel by that country’s mining sector, Armstrong said. In Nigeria, a major U.S. oil supplier, a strike later this week could take 450,000 barrels in daily oil supplies off the market, Armstrong said. Both events highlight how tight oil supplies are.

The upward swing in crude began Thursday, after European Central Bank President Jean-Claude Trichet suggested the bank could increase interest rates in July to counter rising inflation.

“Trichet has managed what no war, no hurricanes, no OPEC has ever managed to do,” analyst Olivier Jakob from Petromatrix in Switzerland said in a research report. Trichet’s statements “shocked the financial system,” Jakob said, and sent the dollar falling against the euro.

Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens. On Monday, the effect reversed; the dollar gained ground, making oil less effective as an inflation hedge. Also, a stronger dollar makes oil more expensive to investors overseas.

Some analysts see warning signs in Friday’s bold oil price jump.

“It was a freakish oil market Friday as the market’s worst fears – some real and some imagined – exploded into a rhapsody of wild buying,” said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago, in a research note.

The $10.75 move had some of the hallmarks of a “blow-off top,” Armstrong said, or a rapid, explosive run-up in prices that’s followed by steep declines. Still, it’s far to early to tell for sure, he added.

“You never know you’ve been in a bubble until it’s gone,” Armstrong said.

In other Nymex trading Monday, July gasoline futures fell 10.8 cents to $3.44 a gallon, and July heating oil futures fell 2.6 cents to $3.948 a gallon. July natural gas futures rose 1.7 cents to $12.71 per 1,000 cubic feet.

In London, July Brent crude fell $2.19 to $135.52 a barrel on the ICE Futures exchange.

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Associated Press Writer Pablo Gorondi in Budapest, Hungary, and AP Business Writer Malcolm Foster in Bangkok, Thailand, contributed to this report.

(Copyright 2008 by The Associated Press. All Rights Reserved.)