Oil falls but gasoline keeps rising

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The price of oil fell from a two-year high, but the Energy Department said gasoline prices were on a course of their own, rising within reach of their all-time end-of-year highs nationally and in California.

Oil was weighed down by China’s second interest-rate hike since October. That raised fears that the manufacturing giant’s economic growth would slow as the country tries to rein in inflation. China is the world’s No. 2 consumer of oil, behind the U.S.

Crude oil futures for February delivery dropped 51 cents Monday to close at $91 a barrel on the New York Mercantile Exchange. Futures had climbed to $91.88 earlier in the trading day, the highest level since Oct. 7, 2008.

But average retail price of a gallon of gasoline -- $3.052 -- was up 7 cents from a week earlier, according to the Energy Department’s weekly telephone survey of U.S. filling stations. In California, the average price was up 4 cents to $3.287.

Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey, predicts that pump prices will still be climbing through New Year’s Eve. Kloza’s firm, together with Wright Express, track gasoline prices on a daily basis from about 100,000 retail outlets nationwide.

“We will end the year with the highest prices ever for this week. Then we will get a bit of a break, but between March and May we will see gasoline prices at $3.25 a gallon to $3.75 a gallon nationally, with California at the highest end of that range,” Kloza said.

End-of-year retail gasoline prices were last this high in 2007: On Dec. 31 that year, the national average was $3.053 a gallon and was on its way to all-time record highs. In July 2008, it reached $4.114. California’s average was $3.298 a gallon Dec. 31, 2007 and climbed to $4.585 by June 2008.

Kloza is not expecting a repeat of 2008.

“In 2008 we lost our collective heads, from Wall Street to Main Street. That will not happen again. Well, I hope not,” he said.

The Energy Department’s weekly survey of filling stations can be found here. The Oil Price Information Service’s daily averages can be found on the AAA Daily Fuel Gauge Report here.

-- Ronald D. White

Chart credit: U.S. Energy Information Administration