Oil price exceeds $102 a barrel, gasoline nears all-time high

2/29/2008

NEW YORK - Crude-oil prices rebounded yesterday, shooting up more than $2 a barrel to a record as a falling dollar and the prospect of lower interest rates attracted fresh money to the oil market. Retail gasoline prices, meanwhile, rose closer to records above $3 a gallon.

The Commerce Department's report that gross domestic product grew at only a 0.6 annual rate in the fourth quarter, as well as the Labor Department's report that unemployment claims rose more than expected drew money into the oil market.

Rather than viewing such news as bad for oil demand, investors considered it confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy.

Interest rate cuts tend to weaken the dollar, and crude-oil futures offer a hedge against a falling dollar. Also, oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Light, sweet crude for April delivery closed $2.45 higher at $102.09 a barrel on the New York Mercantile Exchange after rising to a record of $102.74.

Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $97 to $104 or more today, depending on the how the adjustment is calculated.

A direct comparison with daily Nymex prices is difficult because historical data, gathered before the crude futures contract was created in 1983, are based on average monthly prices posted by oil producers.

Retail gasoline prices rose 0.9 cent between Wednesday and yesterday to a national average of $3.161 a gallon, according to AAA and the Oil Price Information Service. Prices are within 7 cents of May's record of $3.227 a gallon. The Energy Department expects prices to peak near $3.40 a gallon this spring.

; many analysts think prices will rise much higher than that.