As consumers began hitting the road Friday for the Memorial Day weekend, they faced the sobering reality that it now costs $87 to fill a Ford Explorer SUV, up $14 from last year, and $72 to fill a mid-sized Honda Accord, up $12.
That's because gas prices, which took another jump higher overnight, are up nearly 20 percent, or 65 cents a gallon, over the past year to average nearly $3.88 a gallon nationally. But unlike this time last year, when gas prices were at their peak for 2007, pump prices now show no signs of halting their daily assault on the record books.
"Four dollars (a gallon) is a done deal now," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "We could go significantly above that."
On average, drivers in Alaska, Connecticut, California, New York and Illinois are already paying more than $4 for gas, and an increasing number of stations around the country are posting prices higher than $4. In Alaska, where the average price of regular gas stood at a national high of $4.181 Friday, it now costs $94 to fill an Explorer, and $77 to fill an Accord.
Nationally, the price of a gallon of regular gas rose 4.4 cents overnight to a record average of $3.875, according to AAA and the Oil Price Information Service. Prices are headed even higher in coming days because of oil's dramatic rally this week to a new record over $135 a barrel.
"We're going to see some more significant increases here in light of what we've seen in the last few days," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.
Oil prices resumed their upward trck Friday after a one-day profit-taking swoon. Light, sweet crude for July delivery rose $2.18 to $132.99 a barrel on the New York Mercantile Exchange as the dollar weakened against the euro, attracting more investment dollars to energy futures.
A growing number of investors have come to view commodities such as oil as a hedge against inflation and a falling dollar. Also, a weaker greenback makes oil futures less expensive to investors dealing in other currencies. Many analysts see the dollar's protracted decline as one of the chief reasons oil prices have doubled over the past year.
Growing demand for fuel is also helping boost oil prices. Demand for diesel has spiked in China, where power plants in some areas are running short of coal after last week's earthquake. But even before the quake, Chinese diesel imports were rising sharply. China's government has released nearly 170,000 barrels of fuel from its strategic petroleum reserve this week to ensure adequate supplies in earthquake areas.
"China's just hungry for diesel," Ritterbusch said.
Diesel prices in the U.S. rose 5.9 cents to a record national average of $4.649 Friday, according to AAA and the Oil Price Information Service. Diesel's rise has been far more dramatic than gasoline's; diesel prices are $1.73 a gallon higher than one year ago. Diesel is used to fuel most industrial vehicles, and is a big part of the reason why prices for food and consumer goods are rising.
Heating oil, which is closely related to diesel and often traded as a proxy for the fuel, rose above $4 a gallon on the Nymex on Thursday for the first time. On Friday, June heating oil futures rose 3.99 cents to $3.9942 a gallon.
Despite rising demand for diesel, many analysts argue that oil prices have risen well beyond levels that can be justified by supply and demand fundamentals; an increasing number of analysts are referring to the situation as a bubble. U.S. demand for fuel and oil has fallen this year. Some analysts see signs in a recent switch in the relationship between the price of the current July crude contract and prices of crude for delivery in future months that tell them prices could soon fall.
But few analysts are willing to call an end to the rally, noting that investors just continue to plow money into the market, pushing prices ever higher.
"Big mo (momentum) is driving this thing now," Kloza said.