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- Two Cape men charged with second-degree murder of Grandi (3/21/17)2
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Oil surpasses $120 before falling back
NEW YORK -- Oil futures surged to a record of more than $120 a barrel Monday, raising concerns about higher prices for gasoline and goods and services throughout the economy.
Supply threats that emerged overseas and a weaker dollar sent light, sweet crude for June delivery to a new trading record of $120.36 a barrel on the New York Mercantile Exchange before futures retreated slightly to settle up $3.65 at a record $119.97.
Oil's sharp rise this year has driven gas prices to unprecedented levels, prompting consumers to reconsider summer vacation plans and limit daily excursions; they're also spending less at malls and shopping centers because they're paying more not just for fuel, but for all kinds of goods and services. Americans are also being pinched by tight credit conditions, a sluggish jobs market and a downturn in the housing market.
"American consumers are being hit hard financially from a bunch of different directions," said Troy Green, a spokesman for AAA.
The average national price of a gallon of regular gas slipped to $3.611 a gallon on Monday, down 1.1 cents from Friday, according to AAA and the Oil Price Information Service. Prices reached a record $3.623 a gallon on Thursday.
But if oil prices continue climbing, gas prices could rise as high as $3.75 a gallon on a national basis, Green said, though, "in some places, it's already above $4 a gallon."
In most years, gas prices peak in May or early June, then mostly decline for the rest of the year. But oil at $120 -- and rising -- may force the experts to rewrite their rulebook.
The mix of factors that drove oil to its latest record were a microcosm of the forces that have nearly doubled oil prices from their levels of about $62 a barrel one year ago. The dollar weakened against the euro on Monday, attracting investors to commodities such as oil which they see as a hedge against inflation. Also, a falling dollar makes oil less expensive to investors overseas. A series of Federal Reserve rate cuts starting last year weakened the dollar considerably against foreign currencies; analysts blame the dollar's protracted decline for oil's sharp rise this spring.
Supply outages or threats emerged in Iraq, Nigeria and from Iran on Monday; events in all three nations have caused prices to spike many times in recent months.
In Iraq, Kurdish rebels warned they could launch suicide attacks against American interests to punish the U.S. for sharing intelligence with Turkey after Turkey bombed rebel bases in Iraq on Friday. In Nigeria, a Royal Dutch Shell PLC spokesman said attackers hit an oil facility belonging to Shell's joint venture in southern Nigeria and that some oil production has been shut down. And Iran's Supreme Leader Ayatollah Ali Khamenei said his country will not bend to international pressure and give up its nuclear program.
Energy investors grow concerned any time conflict breaks out or is threatened in the oil-rich Middle East. Years of unrest in Nigeria have cut off nearly a quarter of the major U.S. supplier's oil output.
Beyond the occasional threats to crude supplies, global demand for oil continues to grow. While demand for oil and gasoline has been soft in the U.S., the Chinese and Indian economies are growing by double digits, boosting global demand for oil.
Diesel prices fell Monday, slipping to a national average of $4.239 from a record $4.251 on Thursday. The runup in prices of diesel, used to power most trucks, trains and ships, is one reason why food prices are so high.
Andy Lebow, senior vice president at MF Global Inc., thinks the gas price declines of the last four days are almost entirely due to crude oil's sharp drop last week; prices fell from $119.93 on Monday as low as $110.30 on Thursday before rebounding. Gas prices tend to follow prices in the futures market, but with some lag.
"If the price of oil remains this high, we could see the price of gas rise another 10 to 15 cents," Green said.
It's impossible to tell whether gas prices will fall this summer, as they have in the past, Green said. However, he noted that demand for gasoline has fallen since early this year, a sign that high prices are cutting Americans' appetite for fuel. Analysts believe falling demand is preventing refiners from raising gas prices fast enough to keep up with oil prices, which they much buy to turn into fuel. While oil prices have risen nearly 94 percent in one year, gas prices are up only 19 percent.
In other Nymex trading Monday, June gasoline futures rose 8.65 cents to settle at $3.0529 a gallon, and June heating oil futures rose 8.78 cents to settle at $3.3065 a gallon. June natural gas futures rose 40.1 cents to settle at $11.178 per 1,000 cubic feet.
In London, June Brent crude futures gained $3.43 to settle at $117.99 a barrel on the ICE Futures exchange.
Associated Press Writers Yahya Barzanji in Iraq, George Jahn in Vienna and Gillian Wong in Singapore contributed to this report.