Oil surges to its highest level since September 2008. Natural gas prices rise, too.
Traders work in the oil options pit at the New York Mercantile Exchange in New York, March 14, 2011. On March 23, oil prices hit a 30-month high, while natural gas prices also increased.
Seth Wenig/AP
NEW YORK
Oil prices made up for a week-long slump following the Japanese earthquake and are now trading at the highest levels since September 2008. Natural gas prices also moved up.Skip to next paragraph
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Traders also kept a wary eye on pro-democracy protests and outright rebellions in North Africa and the Middle East. The region supplies 27 percent of the world's oil. Crude prices jumped after a bomb exploded at a crowded bus stop in central Jerusalem, killing one person and wounding 20 others. Authorities called it the first major Palestinian militant attack in the city in several years.
Benchmark West Texas Intermediate crude for May delivery added 78 cents to settle at $105.75 per barrel on the New York Mercantile Exchange. Oil hasn't settled that high since Sept. 26, 2008.
In other Nymex trading for April contracts, heating oil dropped 2.12 cents to settle at $3.0550 per gallon and gasoline futures added 1.68 cents to settle at $3.0213 per gallon. Natural gas prices climbed 8.1 cents to settle at $4.335 per 1,000 cubic feet.
The Energy Information Administration's report suggested that motorists are handling higher fuel costs without cutting back. At a national average of $3.548 per gallon, gasoline pump prices are the highest ever for this time of year and have reached a point where economists expect consumers to start to cut spending.
If they use less gas, it'll be a key tipping point for the fragile economic recovery. Many Americans are reluctant to trim their driving, so a drop in gas consumption means "they're doing a lot of other things less," said Kenneth Medlock, an energy expert at Rice University.
"It means they're going out to dinner less, going to the mall fewer times, going to the movies fewer times," Medlock said. Consumer spending will drop in other areas, and that will hurt businesses that have been trying to rebound from the recession, he said. So far, however, the U.S., which consumes more petroleum than any other country, doesn't seem to have balked at higher gas prices.
The EIA said motorists consumed an average of 9.1 million barrels per day of gasoline, up 1.2 percent from the same period last year. EIA said demand has increased each of the past five weeks when compared with 2010. The government report also said gasoline supplies dropped last week by 5.3 million barrels, more than twice as much as expected.
Oil prices have jumped about 24 percent since the middle of February when fighting broke out in Libya and threatened the country's oil fields. The clash between Moammar Gadhafi and rebels has shut down most of the country's oil production, which had supplied nearly 2 percent of world demand. Experts say Libya's exports will stay off-line for months.
The surge in oil prices slowed with the crisis in Japan. The earthquake and tsunami hammered the world's third-largest economy, and Japan's oil consumption was expected to shrink while it picks up the pieces. That only lasted for a week, however, and oil prices rose again as Japan's damaged refineries went back online.
Gasoline has followed oil higher this year, jumping 37.7 cents per gallon just in the past month, according to AAA, Wright Express and Oil Price Information Service. The increase has forced Americans to pay roughly $142.5 million more per day to fill up.
"It's very possible we'll see a national average of $4 per gallon this year," PFGBest analyst Phil Flynn said. And it could go higher. If fighting in the Middle East escalates to the point where exports from other countries are affected, Flynn said oil prices could spike to $200 per barrel, pushing gasoline to $5 per gallon. Until the unrest is resolved, "I'm not taking $5 gas off the table," Flynn said.
Experts disagree at what point motorists will begin to conserve fuel. Exxon Mobil Corp. CEO Rex Tillerson said Americans started cutting back in 2008 when gasoline hit $4 per gallon. Three years later, analysts say the tipping point could be from $3.50 to $4.50 per gallon.
Fred Rozell, retail pricing director at Oil Price Information Service, said "it's too early to tell" whether surging energy prices will force drivers to buy less gas. Rozell said some gas station owners are noticing that people are buying less on the weekend, though it's unclear whether those customers have simply found cheaperprices somewhere else.
In London, Brent crude lost 17 cents to settle at $115.47 per barrel on the ICE Futures exchange.
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