Gas jumps nearly 3 cents to record; oil crosses $124

At the pump, the average price of a gallon of regular gas nationwide rose 2.7 cents to a record $3.645, according to a survey of stations by AAA and the Oil Price Information Service. Diesel prices also rose, adding 0.9 cent to match a record national average of $4.251 a gallon.

Gas prices tend to lag oil futures, and with crude rising to a new record near $124 a barrel Wednesday and likely headed higher, it's widely expected the average price of gas will soon rise as high as $4. Motorists in many areas, including parts of California and Hawaii, are already paying that much, or more.

"If oil prices go the way that pundits are expecting, there's no way we'll stay under $4 a gallon," said Fadel Gheit, an analyst at Oppenheimer & Co. in New York.

Meanwhile, light, sweet crude for June delivery rose 16 cents to reach a settlement record of $123.69 a barrel on the New York Mercantile Exchange Thursday after spending much of the day in negative territory. But in after-market electronic trading, prices rose to a new trading record of $124.49; volume was quite low, making it easy for oil to keep pushing higher.

Analysts said there was little in the way of news driving Thursday's oil moves. Investors occasionally sell a little during rallies to lock in profits, Gheit said. But bullish momentum -and expectations that the dollar will continue to weaken against foreign currencies including the euro -are likely to keep pushing oil to new records, he said.

Goldman Sachs analysts recently predicted prices will rise as high as $150 to $200 a barrel within two years. That forecast has driven much of oil's gains in recent days.

Analysts at Goldman and firms such as Barclays Capital believe tight global supplies and growing demand from fast-growing economies in countries such as China and India are driving oil higher. But Gheit and analysts including Tim Evans at Citi Futures Perspective argue that supply and demand fundamentals don't support such high prices.

"There is no reason why oil prices should be above $60," Gheit said, noting that domestic crude supplies are at average levels, and that refineries are cutting gasoline production as high prices cut consumers demand for fuel. "The physical supplies do not justify the price, it just doesn't make sense."

OPEC Secretary General Abdalla Salem El-Badri on Thursday reiterated his position that oil supplies are adequate, and that there is no need for the cartel to boost production. He said several Organization of Petroleum Exporting Countries oil projects are coming on line, but he noted that several member countries are having a hard time finding buyers for their additional supplies.