Oil prices rose Wednesday after the government said U.S. gasoline demand continues to rise despite sharp price increase at the pump.
The Energy Information Administration report suggests that American motorists are so far handling higher fuel costs without cutting back. At a national average of $3.548 per gallon, retail gasoline prices remain at the highest ever for this time of year and have reached a point where economists expect consumers to start to cut spending.
The EIA said the U.S. consumed an average of 9.1 million barrels per day of gasoline, up 1.2 percent from the same period last year. Gasoline supplies also dropped last week by 5.3 million barrels, more than twice as much as expected.
Benchmark West Texas Intermediate crude for May delivery added 59 cents at $105.56 per barrel on the New York Mercantile Exchange in midday trading.
Oil prices have jumped about 24 percent since the middle of February when fighting broke out in Libya and threatened the country's oil fields. The clash between Moammar Gadhafi and pro-democracy rebels has shut down most of the country's oil production and experts say Libya's exports will remain off-line for months.
The rebellion in Libya, combined with other protests in North Africa and the Middle East, has rattled energy markets and raised concerns that oil supplies will tighten as violence spreads. Prices jumped again Wednesday morning after a bomb went off at a crowded bus stop in central Jerusalem, killing one person and wounding 20 others. Authorities called it the first major Palestinian militant attack in the city in several years.
Gasoline has followed oil higher this year, jumping 37.7 cents per gallon just in the past month, according to AAA, Wright Express and Oil Price Information Service. The increase has forced Americans to pay roughly $142.5 million more per day to fill up.
"It's very possible we'll see a national average of $4 per gallon this year," PFGBest analyst Phil Flynn said. "But $5 gas is possible if we keep seeing more disruptions in the Middle East."
Experts disagree at what point motorists will begin to conserve fuel. Exxon Mobil Corp. CEO Rex Tillerson said Americans started cutting back in 2008 when gasoline hit $4 per gallon. Three years later, analysts say the tipping point could be anywhere between $3.50 and $4.50 per gallon.
Fred Rozell, retail pricing director at Oil Price Information Service, said "it's too early to tell" whether surging energy prices will force motorists to buy less fuel. Rozell said some gas station owners are noticing that people are buying less on the weekend, though it's unclear whether those customers have simply found cheaper prices somewhere else.
In other Nymex trading for April contracts, heating oil dropped less than a penny to $3.0732 per gallon and gasoline futures added 1 cent at $3.0180 per gallon. Natural gas gained 4 cents at $4.299 per 1,000 cubic feet.
In London, Brent crude rose 2 cents to $115.66 per barrel on the ICE Futures Exchange.
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