From: Reuters
Published June 9, 2008 08:36 AM

Gasoline rises above $4 a gallon for first time

The U.S. average price for a gallon of regular gasoline topped $4 for the first time, a survey issued on Sunday by the travel group AAA showed.

AAA's survey showed a national average price of $4.005 per gallon, up from $3.67 a month ago and $3.10 a year ago.

Average national gasoline prices had stabilized last week before Thursday and Friday's spike of U.S. crude oil futures by $16 to a record above $139 a barrel. Friday's one-day gain of $10.75 for crude oil was the biggest daily gain in history, and Thursday's gain was the second biggest.

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A year ago, U.S. crude was trading at $66 per barrel. Since then, a weakening dollar and the chances of violence in oil-producing nations such as Iran have pushed oil prices higher.

The record crude and gasoline prices have taken a bite out of U.S. motor fuel demand and cut sales of gas-guzzling pickup trucks and sport utility vehicles in favor of smaller cars that use less fuel per mile, said Geoff Sundstrom, AAA's fuel price analyst.

"It's looking like the late 1970s or the early 1980s," said Sundstrom referring to increased sales of smaller vehicles. And available now but not decades ago are hybrids, which run on both electricity and gasoline.

"AAA expresses the same degree of shock and concern that consumers all over the United States are feeling as gasoline prices reach this very high level," said Sundstrom. "The upcoming national presidential and congressional elections ought to reflect the concern in the policy debates that are about to take place."

While Americans cringe at the price of gasoline, they are still paying far less than drivers in many nations, including most European countries. Britain, France and Germany each have average gasoline prices that are at least double the average price in the United States, according to the U.S. Energy Information Administration.

REDUCING GAS CONSUMPTION

A survey issued last week found that 74 percent of Americans would change their driving habits if gasoline were to top $4 per gallon.

If gasoline prices hit $5 a gallon, 85 percent of Americans would cut out nonessential driving, consolidate errands, carpool, walk or bike, according to the survey by Ipsos Public Affairs.

Gasoline price analyst Trilby Lundberg's biweekly survey issued on Sunday also showed a national average for regular at $4 per gallon.

"If crude oil prices stay at nearly $139 a barrel, a 30-cent rise (for a gallon of gas) over the next few weeks is possible," said Lundberg, whose publication surveys about 7,000 gasoline stations.

EIA chief Guy Caruso told a Reuters Global Energy Summit last week that the average price for U.S. regular could peak at $4.10 a gallon this month if oil prices are in the $120 to $125 per barrel range.

Investment bank Goldman Sachs analyst Arjun Murti told Barron's oil is likely to rise to $150 to $200 per barrel, but he said $200 was not sustainable because such prices would deeply cut global demand.

At $200 a barrel, Murti said, U.S. gasoline prices would be $5.75 per gallon.

Alaska on May 14 became the first U.S. state to reach $4 for average gasoline. On Sunday, California, with a statewide average for regular gasoline at $4.436, had the highest price among the 50 U.S. states and the District of Columbia.

The AAA survey showed Connecticut and Alaska tied for the second-highest, at $4.296 per gallon. Missouri was the lowest at $3.80.

Prices in some U.S. cities have been above $4 per gallon for months. And mid-grade and high-grade gasoline has been over $4 a gallon for weeks or months in many parts of the United States.

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