ENERGY: Oil, gas prices blaze into record territory

By CHRIS BAGLEY - Staff Writer | Thursday, April 17, 2008 8:23 PM PDT ∞

Fuel prices hit record highs nationwide Thursday, with regular unleaded gasoline surging to $3.82 a gallon in North County, up 8 cents from last week and extending 10 weeks of increases.

Diesel fuel, which powers most delivery trucks, hit $4.35 in North County, according to a weekly survey by the San Diego-based Utility Consumers' Action Network. Diesel's 40 percent rise since last year has forced many North County businesses to accept new fuel surcharges from suppliers, and some have begun to pass the increases to consumers, fueling broader inflation.

Since early February, average prices of regular unleaded have risen 75 cents, a 10-week stretch equaled only by the period leading up to a record set in mid-May 2007.

The trends are particularly worrying when the per-gallon price is broken down into taxes, oil costs and the costs and profits associated with refining, Langley said. Refiners accounted for about $1.50 of each gallon last summer, a share that has fallen toward 20 cents as they're squeezed by rising oil prices and newly frugal drivers, Langley estimated.

"That's bad," said Charles Langley, who conducts the weekly survey for the consumer group. "If they go back up to the type of margins they had last summer, they'll be well, well, well above $4."

Nationally, regular unleaded passed $3.41 a gallon, fulfilling expectations that prices will keep climbing toward $4 as the summer driving season approaches.

Oil prices fluctuated after setting yet another high, of $115.54, Thursday morning. Analysts said investors were locking in gains from crude's ongoing rally and trying to determine whether prices have more room to rise.

In part, gas prices are rising because refiners are switching over from winter-grade gasoline to the more expensive, but less polluting, fuel they're required to sell in the summer. That has pulled supplies lower lately as refiners try to sell off all of their winter fuel. Short supplies of key blending components needed for summer gasoline are exacerbating the problem.

Rising crude prices and higher summer demand are expected to drive up gasoline more. A sagging economy and price-conscious drivers have driven down demand for gas since January, but it's expected to rise from current levels as more families may hit the road for vacation in a few months.

"We have the perfect storm brewing," said James Cordier, president of Tampa, Fla., trading firms Liberty Trading Group and OptionSellers.com.

Oil, meanwhile, has jumped ever higher on concerns about falling supplies and rising global demand. A weaker dollar, too, has attracted speculative investors to crude futures. Crude rose to its new trading record of $115.54 Thursday morning as the dollar fell to a new low against the euro, but later pulled back when the dollar strengthened. A falling dollar also makes oil cheaper to overseas investors and more expensive to U.S.-based refiners.

The Associated Press contributed to this story. Contact staff writer Chris Bagley at (760) 740-5444 or cbagley@nctimes.com.

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