Gas prices push closer to $3.50 a gallon, oil passes $116

The price of crude oil was pushed higher after a militant group in Nigeria said it had sabotaged a major oil pipeline operated by a Royal Dutch Shell PLC joint venture and promised further attacks on the country's petroleum industry.

A spokeswoman for Shell confirmed that the pipeline was leaking, and said the damage appeared to have been caused by explosives. Nigeria is a major supplier of oil to the U.S.

The escalation in crude prices threatened to further boost gasoline costs.

At the pump, the national average price of regular gas rose 2.7 cents overnight to a record $3.445 a gallon, according to a survey of stations by AAA and the Oil Price Information Service. Diesel fuel added 2.2 cents to a record national average of $4.168 a gallon.

The spike in the cost of fuel is hurting consumers already feeling the effects of a slowing economy, a sluggish job market and falling home values. Soaring prices of diesel, which runs most of the world's trucks, trains, ships and heavy equipment, is a major factor pushing food prices higher.

Some analysts expect gas prices to peak near $3.80 a gallon; the Energy Department, in a recent forecast, said prices could average $4 a gallon nationally at times.

"I would say that energy prices are having the most profound effect on the economy in recent memory," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago, in a research note.

Oil, meanwhile, pushed to new records.

Light, sweet crude for May delivery rose to a new record of $116.31 on Friday before retreating to trade up $1.19 at $116.05 a barrel on the New York Mercantile Exchange.