NEW YORK - Oil futures shot higher Tuesday, closing above $100 for the first time as investors bet that crude prices will keep climbing despite evidence of plentiful supplies and falling demand. At the pump, gas prices rose further above $3 a gallon.
There was no single driver behind oil's sharp price jump; investors seized on an explosion at a 67,000-barrel-per-day refinery in Texas, the falling dollar, the possibility that OPEC may cut production next month, the threat of new violence in Nigeria and continuing tensions between the U.S. and Venezuela.
That there was no overriding reason for such a price spike could be a bad omen for consumers already bearing the burdens of high heating costs and falling real estate values.Many recent forecasts have said oil demand growth this year will be less than expected, yet prices continue to rise. That suggests they may continue rising as the weakening dollar attracts new investors.
Light, sweet crude for March delivery rose $4.51 to settle at a record $100.01 a barrel on the New York Mercantile Exchange after earlier rising to $100.10, a new trading record. It was the first time since Jan. 3 that oil had been above $100.
Oil prices are still within the range of inflation-adjusted highs set in early 1980.
Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
At the pump, meanwhile, gas prices jumped 1.8 cents to a national average price of $3.032 a gallon Tuesday, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are following oil prices higher.
The Energy Department and many analysts expect gas prices to peak this spring well above last May's record of $3.227 a gallon.
Gasoline and heating oil prices appeared to lead Tuesday's wide advance in energy prices due to the explosion Monday at Alon USA's Big Spring, Texas, refinery, which could be shuttered for two months.
"The refinery fire in Texas is making people a little concerned," said Michael Lynch, president of Strategic Energy & Economic Research in Amherst, Mass.
March gasoline jumped 10.93 cents to settle at a record $2.6031 a gallon, and March heating oil rose 11.45 cents to settle at $2.7614 a gallon, also a record.