NEW YORK - Oil futures surged to a new record over $120 a barrel Monday, raising concerns about higher prices for gasoline and goods and services throughout the economy. Retail gas prices fell more than a cent over the weekend, but oil's advance increased the likelihood that pump prices would resume their climb.
Supply threats that emerged overseas and a weaker dollar sent light, sweet crude for June delivery to a new trading record of $120.36 a barrel on the New York Mercantile Exchange before futures retreated slightly to settle up $3.65 at a record $119.97.
Oil's sharp rise this year has driven gas prices to unprecedented levels, prompting consumers to reconsider summer vacation plans and limit daily excursions; they're also spending less at malls and shopping centers because they're paying more not just for fuel, but for all kinds of goods and services. Americans are also being pinched by tight credit conditions, a sluggish jobs market and a downturn in the housing market.
'American consumers are being hit hard financially from a bunch of different directions,' said Troy Green, a spokesman for AAA.
The average national price of a gallon of regular gas slipped to $3.611 a gallon on Monday, down 1.1 cents from Friday, according to AAA and the Oil Price Information Service. Prices reached a record $3.623 a gallon on Thursday.
But if oil prices continue climbing, gas prices could rise as high as $3.75 a gallon on a national basis, Green said, though, 'in some places, it's already above $4 a gallon.'
In most years, gas prices peak in May or early June, then mostly decline for the rest of the year. But oil at $120 - and rising - may force the experts to rewrite their rulebook.
The mix of factors that drove oil to its latest record were a microcosm of the forces that have nearly doubled oil prices from their levels of about $62 a barrel one year ago. The dollar weakened against the euro on Monday, attracting investors to commodities such as oil which they see as a hedge against inflation. Also, a falling dollar makes oil less expensive to investors overseas. A series of Federal Reserve rate cuts starting last year weakened the dollar considerably against foreign currencies; analysts blame the dollar's protracted decline for oil's sharp rise this spring.
Supply outages or threats emerged in Iraq, Nigeria and from Iran on Monday; events in all three nations have caused prices to spike many times in recent months.