Gas prices across U.S. jump to above $3.73

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By The Associated Press | Tuesday, May 13, 2008 |

A cab driver fills his taxi at a gas station in New York. Gas prices shot to a new record over $3.73 a gallon today. (AP Photo)

NEW YORK — Gas prices shot to a new record over $3.73 a gallon today, and their advance shows little sign of slowing with Memorial Day weekend, the traditional start of the summer driving season, just 10 days away.

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Oil futures, meanwhile, rose on reports that diesel inventories fell in Europe.

At the pump, the national average price of a gallon of regular gas rose 1.4 cents overnight to a record $3.732, according to a survey of stations by AAA and the Oil Price Information Service. Prices have now risen to the level at which the Energy Department forecasts they’ll peak in June, on a monthly average basis; that means prices may still go higher, but their average will peak at around $3.73.

Many analysts have predicted prices will surge much higher, and may breach the psychologically important $4 level on a national basis within the next couple of months. Prices are already that high in many parts of the country.

Some analysts are beginning to question whether gas prices will follow their typical pattern of peaking around Memorial Day, then declining through the summer.

“Retail prices aren’t going to decline as long as any part of the energy complex is heading higher,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

The primary factor driving gas prices higher is the price of crude, which has doubled in the last year. Most predictions that oil prices have risen too far and would soon decline have fallen flat. As long as crude prices keep rising, gas prices may buck their normal pattern and follow, Ritterbusch reasoned.

“This whole year has been unique,” Ritterbusch said. “We’re going to see other unique things ... taking place here as we go forward.”

Today, light, sweet crude for June delivery rose $1.61 to $125.84 a barrel on the New York Mercantile Exchange. The contract set a new trading record of $126.40 on Monday.

Oil prices were following heating oil futures higher today, analysts said, on reports that stocks of distillate fuels, which include diesel fuel and heating oil, fell last month in Europe amid rising demand, Ritterbusch said.

“You’ve got huge demand for diesel fuel overseas,” Ritterbusch said.

June heating oil futures rose 10.68 cents to $3.6666 on the Nymex. Heating oil futures are often traded as a proxy for diesel fuel. Retail diesel prices rose 2.9 cents Tuesday to a national average of $4.39 a gallon, according to AAA and the Oil Price Information Service. The high price of diesel has helped drive up costs for goods and services throughout the economy.

Investors shrugged off a stronger dollar today, analysts said. The dollar strengthened against the euro, which often prompts investors who had bought commodities such as oil as a hedge against inflation to sell. Also, a stronger dollar makes oil more expensive for investors overseas.

Meanwhile, the International Energy Agency, an adviser to mostly western, industrialized nations, said high prices are cutting demand for oil and petroleum products in the U.S. and Europe. The IEA cut its global oil demand growth forecast for this year to 1.2 percent from 1.5 percent. In the U.S., the IEA said demand for oil may contract by as much as 2.1 percent this year, while demand for gasoline will drop by about 1 percent.

Energy investors are also concerned about China, which recently reported a drop in crude imports.

“Although imports of fuel oil were the highest in eight months in April, imports in May are forecast to drop by 15 percent due to prices which remain very high despite government subsidies,” said Addison Armstrong, an analyst at Tradition Energy in Stamford, Conn., in a research note.

Analysts were uncertain whether Monday’s 7.9-magnitude earthquake in central China would have a significant impact on demand. The quake killed about 10,000 people and knocked power plants and other factories off-line. Strong demand from China and other fast-growing economies has underpinned oil’s rise in recent years.

In other Nymex trading today, June gasoline futures rose 3.86 cent to $3.2028 a gallon, and June natural gas futures rose 23.7 cents to $11.538 per 1,000 cubic feet.

In London, June Brent crude futures rose 91 cents to $123.82 a barrel on the ICE Futures exchange.