Gas hits $3.72 per gallon, up 30 cents in month

February 28, 2012 - 6:56 PM
Oil Prices

This Feb. 27, 2012 photo, shows gas prices at a Pittsburgh Exxon mini-mart. The price of gasoline rose for the 21st straight day on Tuesday. Drivers are now paying an average of $3.72 a gallon nationwide, about 24 cents more than before the streak began. (AP Photo/Gene J. Puskar)

NEW YORK (AP) — The price of gasoline rose for the 21st straight day on Tuesday. Drivers are now paying an average of $3.72 a gallon nationwide, about 24 cents more than before the streak began.

The winter surge is being driven primarily by the rising price of oil, which has been above $100 a barrel since Feb. 10 as tensions mount between the West and Iran over its nuclear ambitions.

Gas prices are highest in Alaska, California, New York, Connecticut and Hawaii, which is tops at $4.32 a gallon. Nationwide, gasoline prices are 10 percent higher than a year ago — and at their highest level ever for the end of February.

A steep rise in gas prices early last year caused consumers to sharply cut back on spending and brought economic growth almost to a standstill. But this year's increase hasn't caused a repeat, economists say. With hiring accelerating and incomes higher, consumers are better able to afford to pay more for gas.

Prices for other goods, such as food, are holding relatively steady after surging in 2011. Natural gas costs have plummeted recently, reducing consumers' heating bills. Those trends should offset some of the squeeze on consumers from pricier gas.

The rising price of oil isn't the only factor driving pump prices higher. Every year, refineries must temporarily idle their facilities in order to prepare them for the production of cleaner-burning gasoline that's required in summer. This briefly constrains gasoline supplies and puts upward pressure on prices.

Analysts say the national average could peak in late April as high as $4.25 per gallon.

The price of gas has risen 30 cents in a month. That 30-cent jump, if sustained over a year, would cost the economy about $41 billion. The Energy Information Agency, a branch of the Energy Department, in early February estimated that gasoline would average $3.55 a gallon this year, 2 cents higher than last year. The EIA also forecast that West Texas Intermediate, used to price oil produced in the U.S., would average $100.40 a barrel, compared with $94.86 a barrel in 2011.

WTI has risen 8 percent to around $107 a barrel so far this year. Brent crude from the North Sea, used as a proxy for the foreign oil that's imported by U.S. refineries, has gained more than 13 percent to $122 a barrel. The main reason for the increase is increased tension between Iran and the West.

On Tuesday, WTI dropped $2.01, or nearly 2 percent, to $106.55 a barrel. Brent fell $2.62, or 2.1 percent, to $121.55 a barrel.

Petroleum demand in the U.S., the world's largest oil consumer, has fallen 5.5 percent so far this year, compared with a year ago. A weekly survey by MasterCard SpendingPulse shows that Americans have cut back on gasoline spending for the past 49 straight weeks. Last week, the Federal Highway Administration said that motorists drove 1.2 percent less in 2011.

Heating oil fell by 6.26 cents to end the day at $3.2238 per gallon on the NYMEX and gasoline futures fell by 8.82 cents to finish at $3.0401 per gallon. Natural gas futures lost 8.4 cents to end at $2.519 per 1,000 cubic feet.

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Economics Writer Chris Rugaber in Washington, D.C., contributed to this report.

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