OIL prices hit a new nine-month high yesterday as the dollar fell and US gas pump prices climbed closer to US$4 a gallon, the highest ever for this time of year.
Benchmark crude prices rose by US$1.55 to end the day at US$107.83 per barrel in New York. That's the highest price since May 4 of last year.
Brent crude increased by 72 cents to finish at US$123.62 per barrel in London.
The rise in oil prices has helped push retail gasoline prices to record levels for this time of year. Benchmark crude has increased 9 percent so far in 2012, and gas pump prices are up about 5 percent.
A gallon (3.8 liters) of regular has already topped US$4 in California, Hawaii and Alaska. Gasoline is nearly US$3.90 per gallon in New York and Connecticut. Analysts think Americans could see a national average of US$4.25 a gallon (US$1.12 a liter) by April.
The ongoing tension between western nations and Iran is continuing to drive oil prices higher.
Iran, the world's third-biggest oil exporter, already has cut off shipments to Britain and France, and it may halt exports to other European countries. Iran also has threatened to close the Strait of Hormuz, a crucial waterway in the Persian Gulf through which one-sixth of the world's seaborne exports flow every day.
Experts doubt Iran will try to dramatically cut shipments, given its dependence on oil sales. About half of the country's revenue comes from crude. But many investors are snapping up oil contracts in case tensions escalate further.
"The Iranian influence remains as a major driver" in oil prices, independent analyst and trader Jim Ritterbusch said.
In addition to an oil embargo set to start this summer, European Union leaders said yesterday that the EU is preparing regulations that will put further financial pressure on Iran by keeping its banks from using a major financial clearinghouse.
Oil prices got an extra boost yesterday afternoon as the dollar fell against the euro and other major currencies. Oil is priced in US currency and tends to rise as the dollar falls and makes crude cheaper for investors with foreign money.
Oil prices are higher even though US petroleum demand has been tanking compared to a year ago. The Energy Information Administration said yesterday that demand has dropped 6.7 percent for oil, and 6.1 percent for gasoline. The US remains the world's biggest oil consumer, but government data show that demand is growing the most overseas in developing countries like China.
Meanwhile, the price of natural gas fell after the government said supplies remain significantly higher than average for this time of year. Natural gas futures yesterday fell by 2 cents to finish at US$2.62 per 1,000 cubic feet in New York.
A boom in North American shale drilling has filled underground storage facilities across the country. The Energy Information Administration says supplies are more than 40 percent higher than the five-year average.
Major natural gas producers recently cut back on production, as prices linger around a 10-year low. But analysts say they're not doing enough to reduce the glut.
"There's still an avalanche of gas available right now," said Gene McGillian, a broker and oil analyst at Tradition Energy.
In other energy trading, heating oil rose 2 cents to finish at US$3.29 per gallon and gasoline futures rose by 3 cents to end at US$3.11 per gallon.