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Gas jumps above $3.67, oil passes $126 on Venezuela concerns

By JOHN WILEN,

Posted: 2008-05-09 10:52:39

NEW YORK (AP) - Oil rose above $126 a barrel for the first time Friday, bringing its advance this week to nearly $10, as investors questioned whether a possible confrontation between the U.S. and Venezuela could cut exports from the OPEC member. Gas prices, meanwhile, rose above an average $3.67 a gallon at the pump, following oil's recent path higher.

On Friday, The Wall Street Journal published a report that suggested closer ties between Venezuelan President Hugo Chavez and rebels attempting to overthrow Colombia's government. Chavez has been linked to Colombian rebels previously, but the paper reported it had reviewed computer files indicating concrete offers by Venezuela's leader to arm guerillas. That appears to heighten the chances that the U.S. could impose sanctions on one of its biggest oil suppliers.

"If we put on sanctions, I'm sure Chavez would threaten to cut off our oil supply," said Phil Flynn, an analyst at Alaron Trading Corp. "Obviously that would have a major impact on oil prices."

Light, sweet crude for June delivery vaulted to a new record of $126.20 in morning trading on the New York Mercantile Exchange before retreating to trade up $1.09 at $124.78 a barrel.

Even if Chavez cut oil shipments to the U.S., Venezuelan oil would still make its way to the U.S. via middle men, who would buy it from Venezuela and resell it to the U.S., Flynn said. But that new layer in the supply chain would bump up costs.

Oil prices also were boosted Friday by the dollar, which declined against the euro. The European Central Bank said it was unlikely to consider interest rate cuts to cool the strong euro against the slumping dollar. Investors often buy commodities such as oil as a hedge against inflation when the greenback falls. A weaker dollar also makes oil less expensive to overseas investors.

Many analysts believe the doubling in oil prices since this time last year has much to do with the dollar's protracted decline. Another school of thought thinks tight global supplies of oil, driven by growing demand in countries such as China, Brazil and India, is the primary factor driving oil higher.

Oil's surge is pushing retail gas prices higher. The national average price of a gallon of regular gas jumped 2.6 cents overnight to a record $3.671 a gallon according to a survey of stations by AAA and the Oil Price Information Service. The Energy Department expects prices to peak at a monthly average of $3.73 in June, though many analysts say national average prices could rise as high as $4. Consumers in many regions, including parts of California and Hawaii, are already paying that much.

Demand for diesel fuel is also growing worldwide, but supplies of distillates, which include diesel and heating oil, fell unexpectedly last week, the Energy Department said Wednesday. That's pushing U.S. diesel prices to record highs and inflating heating oil prices in the futures market; heating oil futures are often viewed as a proxy for diesel.

Heating oil for June delivery rose 7 cents to $3.5798 on the Nymex after earlier setting a trading record of $3.6125. At truck stops, retail diesel prices rose 1.8 cents overnight to a record national average of $4.269 a gallon,

Diesel is used to move most of the world's food, consumer and industrial goods via truck, ship and rail. Skyrocketing diesel prices are part of the reason food and consumer goods prices are so high.

In other Nymex trading Friday, June gasoline futures rose 3.72 cents to $3.175 a gallon, and June natural gas futures rose 13.2 cents to $11.395 per 1,000 cubic feet.

In London, June Brent crude futures rose $1.79 to $124.63 a barrel on the ICE Futures Exchange.

Associated Press Writer Pablo Gorondi in Budapest and AP Business Writer Thomas Hogue in Bangkok, Thailand, contributed to this report.

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

05/09/08 10:49 EDT

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393 comments

Mspolletjr 08:53:45 PM May 09 2008

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BAKERVLBJCB-----IF BIG OIL WANTED TO DRILL IN ALASKA,OFF THE USA COAST LINE,ETC,THEY WOULD HAVE BURIED THE TREE HUGGERS LONG AGO.
WHY DRILL FOR MORE OIL??? IT WOULD ONLY FORCE THE PRICE OF OIL DOWN AND BIG OIL WOULD MAKE LESS MONEY.BIG OIL IS NOT STUPID !!!

Mspolletjr 08:47:16 PM May 09 2008

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OH YES !!!!!! THE BUSH OIL MACHINE WOULD BLAME VENEZUELA AND NOT THEIR BIG OIL BUDDY SAUDI ARABIA !!!!!!

BAKERVLBJCB 04:23:35 PM May 09 2008

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PEOPLE!!!
WE HAVE TO DEVELOP THE OFF SHORE AND LAND BASED RESERVES THAT THE TREE HUGGERS HAVE SUCCESSFULLY BLOCKED FOR 20 YRS.
IF A THREAT OF THAT RAT BASTARD CUTTING OFF SUPPLIES IS REAL, WE ARE HEADED FOR GAS LINES AND HIGH UNEMPLOYMENT LIKE THE 80'S.
THESE PEOPLE ARE MOTIVATED AT THE CORE BY COMMUNIST LEFT OVERS FROM THE COLD WAR THAT HAVE THE GOAL TO BREAK OUR ECOMOMY AND OUR NATION FROM THE INSIDE. IT IS TIME THAT WE SAW THEM FOR WHAT THEY ARE AND STOPPED THEM IN THEIR TRACKS. BEFORE WE ARE ALL I RUIN.

UNITEDPAINTINGS 04:07:26 PM May 09 2008

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WCRO72, The big Corporations may be getting a Tax break, but if they didn't the cost of any product would be higher. Remember Economics 101, Corporations don't pay taxes, the end consumer does

heidihanson 03:30:10 PM May 09 2008

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DWUZZIE 02:42:32 PM May 09 2008

Report This! Yes, back then they also did away with solar and wind tax credits. I remember builders trying to build energy efficient homes considering sun angles, roof overhangs etc., but without incentives back then we are reduced to the cookie box developments of today
...............
Yes the Brazilian government was who built the ethanol industry for thier people. If we were to rely on the "invisible hand" Nothing will ever be done until we are reduced to chattle. But then that is what they want.

Happy29rcrfan 03:07:45 PM May 09 2008

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Get the vasoline out people...your going to need it

DWUZZIE 02:46:30 PM May 09 2008

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heidihanson
hmmm, THAT WOULD BE.... BUSH (THE DYNASTY) JAMES BAKER, CHENEY, RUMSFELD (AND HIS COTERIE WOLFOWITZ, ZOELLICK, PERLE, IE THE ISREALI CONNECTION) actually there are many many in their cabal who have ministrated world and US events wether in control or from behine the scenes for decades.

Yes, and that is the same period that we started on our 10 TRILLION defecit

Kidcat24 02:45:55 PM May 09 2008

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Bush= Veto, drill, Veto, drill, Veto, drill

DWUZZIE 02:42:32 PM May 09 2008

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Yes, back then they also did away with solar and wind tax credits. I remember builders trying to build energy efficient homes considering sun angles, roof overhangs etc., but without incentives back then we are reduced to the cookie box developments of today

heidihanson 02:38:59 PM May 09 2008

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DWUZZIE 02:29:05 PM May 09 2008

Report This! rssanders
Please look back to the late 70's under Carter when the oil shale projects were being developed. This plan even origionates as an idea under Ford so lets consider it bipartisan. It was to make us INDEPENDENT of foreign oil. When Reagan was elected, it was immediately scrapped. Then ask yourself who were the players in the Reagan administration---They're still there today
.................
hmmm, THAT WOULD BE.... BUSH (THE DYNASTY) JAMES BAKER, CHENEY, RUMSFELD (AND HIS COTERIE WOLFOWITZ, ZOELLICK, PERLE, IE THE ISREALI CONNECTION) actually there are many many in their cabal who have ministrated world and US events wether in control or from behine the scenes for decades.

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393 comments