Crude oil prices shattered another record yesterday, hitting $108 a barrel while the price of regular unleaded gasoline at the pump came within half a cent of its all-time high.
A White House announcement that Vice President Cheney would probably ask Saudi Arabia to boost oil output during a trip to the Middle East next week did nothing to blunt the rise in oil prices yesterday. Much of the nearly $3-a-barrel increase came after the announcement.
As the rising cost of crude oil trickles down to the gasoline pump, fuel prices are siphoning cash away from other consumer spending, making it harder to revive the flagging U.S. economy and putting pressure on the Bush administration.
According to the auto club AAA, the price of gasoline climbed to $3.222 a gallon yesterday, just shy of the $3.227 record set May 24.
"We're hurting in this thing, and it doesn't look like there's any end of it," said Ralph Bombardiere, executive director of the New York State Association of Service Stations and Repair Shops. "It looks like it's heading to $4" a gallon.
Bombardiere, who said members of his group of small service stations were having trouble raising pump prices fast enough to keep up with rising wholesale costs, added: "As the price goes up, it becomes a concern for us. We're the last line. We're the guys you face."
An opinion poll conducted in early February by the Pew Research Center for the People and the Press showed that 35 percent of Americans named the rising price of gasoline as the economic issue that worried them most. In the same poll, 60 percent of those surveyed said it was "difficult" for their families to afford gasoline. Since the poll was completed, retail gasoline prices have risen 24.7 cents a gallon.
The prices of other petroleum products are also soaring. Diesel fuel, usually cheaper than gasoline, is now more expensive. The Energy Department's Energy Information Administration said the average U.S. price of diesel was $3.819 a gallon in the week ended yesterday, up 53.9 cents in just four weeks. Heating-oil prices are also at all-time highs, up more than a dollar a gallon over the past year.
Cheney is scheduled to meet Saudi King Abdullah during a trip that starts Sunday. Discussions are expected to deal with oil and the security situation in Iraq.
Saudi Arabia is the world's biggest oil exporter and has more excess production capacity than any other member of the Organization of the Petroleum Exporting Countries. However, despite President Bush's entreaties, Saudi officials have asserted that oil markets have adequate supplies.
"I'm sure that energy issues will come up there," said White House spokesman Dana Perino. "Certainly the position of the United States and the president is that we believe that more supplies should be out there on the market. And the president does want OPEC to take into consideration that its biggest customer, the United States, that our economy is weakened, and part of the reason is because of higher oil prices; we think that more supply would help."
Democrats seized on the price increases to hammer President Bush for his threat to veto an energy tax bill that would eliminate a tax break for the five biggest oil companies and extend tax breaks for solar and wind projects.
"How many records does the price of oil have to set and surpass before President Bush stands up for hardworking American families and stops taxpayer giveaways to Big Oil?" House Speaker Nancy Pelosi (D-Calif.) asked in a statement.
Analysts blamed the relentless increase in petroleum prices on an influx of investors fleeing sinking and unsteady financial markets and those searching for hedges against inflation. Unlike most other days recently, however, prices of other commodities -- including gold, copper and platinum -- fell while oil prices rose again.
While there are signs that U.S. gasoline consumption has flattened or declined slightly in the past few weeks, traders and investors still expect world demand for oil to remain strong. China's crude oil imports grew 18 percent last month, according to Bloomberg News.
Last week, Goldman Sachs raised its forecast for 2009 U.S. crude prices to $105 a barrel from $90 a barrel. Lehman Brothers has also raised its first-quarter forecast for crude prices, and today the Energy Information Administration is expected to increase its short-term oil price forecast. Its last forecast, issued only a month ago, had predicted oil prices of just $88 a barrel for March.
Gasoline prices are rising as crude costs grow. Tancred Lidderdale, an analyst with the EIA, said gasoline prices rise about 2.4 cents a gallon for every $1-per-barrel increase in crude oil.
Lidderdale said an additional factor in rising gasoline prices was the annual switch of refineries to make summer-grade gasoline, a more expensive form designed to minimize the evaporation of fuel in the summer heat.
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