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

By JOHN WILEN,

Posted: 2008-05-09 15:51:54

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 $126.25 on the New York Mercantile Exchange before retreating slightly to settle up $2.27 at a record $125.96. Oil futures set new records for the fifth straight day, and ended the week up $9.64, or 8.3 percent.

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 12.62 cents to settle at $3.636 on the Nymex after earlier setting a trading record of $3.6524. 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 6.34 cents to settle at a record $3.2012 a gallon after rising to its own record of $3.2038, and June natural gas futures rose 27.4 cents to settle at $11.537 per 1,000 cubic feet.

In London, June Brent crude futures rose $2.56 to settle at $125.40 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 15:50 EDT

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599 comments

EdwardD4255 08:54:25 PM May 11 2008

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Speaking as a fiscal conservative, we all need to conserve. Oil is like energy cocaine and we need to break the habit. The world I grew up in doesn't exist any more, sad to say. People need to wake up and make a difference. It's not about name calling or blame placing. Its about doing what you can do as a family to make the world a better place. Politicians, both Democrat and Replublican, are not serving you. They should all be thrown out of office. Oil will skyrocket because there is no alternative. We will pay whatever the price is because we all need to get to work and make a living. Until we demand alternative energy nothing will change and we'll all end up bankrupt.

HaveP 10:55:35 AM May 11 2008

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if you cant feed them dont breed them

RKnapp0205 01:21:54 PM May 10 2008

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Well, MystikalStorm217, have you taken asessment of your life - 6 kids and collecting foodstamps - you've gotta be kidding. Have you furthered your education, explored career possibilties, or are you a perpetual victim? I also suspect you know nothing about proper nutrition. Use those food stamps to buy food that makes you sick and fat?
I may be wrong, but something tells me I've hit the nail on the head.

RKnapp0205 01:12:29 PM May 10 2008

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Lots of great suggestions on this blog - except for the tree hugging liberals - and their counterparts in DC - we do need to get rid of the lobbyists, tree huggers, and everyone else who defies plain ol common sense. Most of the folks on this board are hard working Americans, frustrated by DC politics, and frightened by the prospect of radical black sympathizer or flat out powermonger as the next president. Want another Jimmy Carter - along with working your butt off to support a bunch of people in Africa, no less. IBD reports Obama's plan for America includes a tax rate of 52% for you and I - the "rich" (anyone who earns a decent wage (over 50K) is rich in his book). It's all about power.
With the Dems controlling Congress, a nightmare will unfold if Hillbama get in. There will be no chance to get rid of corn based ethanol, drill in Anwar, or do anything that doesn't benefit big ol government.
With Obama at the helm, we'll be a third world country within a decade.
Ask folks in Vene

Kidcat24 11:07:58 AM May 10 2008

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I'm talking about all consumption of goods not just oil

DONPHART 10:51:50 AM May 10 2008

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You can't conserve your way out of an oil shortage. If the whole world agreed to stop purchasing oil it might but THAT IS NOT GOING TO HAPPEN!!! Join reality!!!! China and India's consumption increases will offset any conservation you an think of.

Kidcat24 10:26:48 AM May 10 2008

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Let the commoners and peasants come together
Stop the bickering and stop buying the rich guys things.

Kidcat24 10:25:51 AM May 10 2008

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I have to believe that no matter what party you are for
You can't be happy with this

Kidcat24 10:23:06 AM May 10 2008

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Us commoners and peasants need to come together
We have strength
When we see the rich guys starting to lose
Things could start happening in our favor
Stop buying things we really don't need.
I am guilty of this
and I have stopped !

GATOLULU 09:43:10 AM May 10 2008

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Let all AMerican people stop buying gasoline for 3 days in a row. Let all American workers call sick for 3 days in a row...Let us stop the American economy for 3 days and let us see what the rich bastards who control this country are going to do about it.

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