Oil tops $57 a barrel, and a gallon of gas is at $2.05. Prepare for $2.50.
As the price of oil nears $58 a barrel, the price of regular gasoline at the pump may soon exceed $2.40 a gallon. And if oil crests above $60 a barrel, Americans could be paying as much as $2.75 a gallon by the time the summer driving season gets under way.
This sudden spurt - frustrating everyone from OPEC oil ministers to anyone filling up their tank - seems to be an intense combination of big demand, limited spare capacity, and speculation. "The market is pretty tight right now," says John Felmy, chief economist at the American Petroleum Institute (API).
Indeed, Thursday morning on the energy futures markets, the price of crude oil hit a record price of more than $57 a barrel (not adjusted for inflation). The price of gasoline also hit a record at $2.05 a gallon nationally, according to AAA.
"Who knows where it will go?" says Mike Fitzpatrick, a trader at FIMAT USA, a commodities trading firm. "Speculation is running rampant."
Mr. Fitzpatrick says part of the increase comes from new investors and speculators entering the oil markets. "Now, we're seeing pension funds, equity funds, people who feel they need a commodity component in their portfolios," he says. "They are unencumbered by numbers, by history."
Despite the high prices, energy demand continues to be strong. Some of this is weather-related: Cooler than normal temperatures have kept demand for home heating oil strong in the Northeast. "It's been a long, cold end of winter," says Mr. Felmy.
At the same time, Americans are driving more. On Wednesday, API statistics showed a 1 percent gain in gasoline demand in February. Some of this increased demand is the result of a healthy economy, says Felmy.
Globally, demand remains strong as well. The main forecasters continue to predict that China will represent a third of growth in demand. Some of the Chinese appetite comes from work on filling a strategic petroleum reserve of up to 750 million barrels of oil.