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

By JOHN WILEN,

Posted: 2008-05-09 12:11:45

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 $1.28 at $124.97 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 dollar's protracted decline has much to do with the doubling in oil prices since this time last year. 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 7.15 cents to $3.5813 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 3.92 cents to $3.177 a gallon, and June natural gas futures rose 14.8 cents to $11.411 per 1,000 cubic feet.

In London, June Brent crude futures rose $1.83 to $124.67 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 12:11 EDT

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387 comments

Santiagoki 08:41:24 PM May 09 2008

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these oil investors are controling the population and doing what ever they want . they all full of **** , the reason they jacking the price is because summer is here . and they want to cash inn on the traveling people. The big question is why is the goverment is not using are tax money to put biodiesel in the pumps. the reason is the big oil investors control are goverment .

Santiagoki 08:41:18 PM May 09 2008

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these oil investors are controling the population and doing what ever they want . they all full of shit , the reason they jacking the price is because summer is here . and they want to cash inn on the traveling people. The big question is why is the goverment is not using are tax money to put biodiesel in the pumps. the reason is the big oil investors control are goverment .

DavidCindy9 07:30:38 PM May 09 2008

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Wait i just ate some beans and i might have to fart. Lets raise the price of oil !!!! we may have a thunder storm in the Gulf. Lets raise oil prices. Investors think this is fun while the world suffers. Is ther no one to stop this. Recession is driven buy these investors. They should burn in hell with their $126.00 dollar oil .

Pinkturkeybull 06:42:08 PM May 09 2008

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no gas no ass lol

JWTHunter 06:26:20 PM May 09 2008

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every country hates the united states,thanks to geo bush,they will hate us more if john mc bush gets in.

Badlands41 06:12:35 PM May 09 2008

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This whole "energy crisis" should have been resolved in the 1970's. Foreign oil dependence was critical back then, so what happened between then and now? I might buy a Hummer now, mothball it and drive it around 20 years from now when gas is back down to 2.50 a gallon to help history repeat itself. . . . . . .

Bchiefbuckwheat 05:53:09 PM May 09 2008

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Report This! ..................... At what point will the US govt. 'subsidize' gasoline to prevent riots???
=============================
Time will tell
I guess GW does not care for the US people like Chavez does for his?

DTwoLeftFeet 05:50:49 PM May 09 2008

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Why not riot?????AFTER YOU

DTwoLeftFeet 05:46:46 PM May 09 2008

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Do all Latin American dictators have pockmarked faces. Chavez looks like Noriega (i know my spelling is crude) Is there someting in the Latin American water???? maybe too much oil scum???? LOLOL

Bchiefbuckwheat 05:45:22 PM May 09 2008

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DTwoLeftFeet 05:43:17 PM May 09 2008

Report This! and I have toyed with the alternative of using public transportation but they have just increased fares but cut routes
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Why not riot if it will cause GW to subsidize gas down to less then 10 cents????

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387 comments