Gas above $3.75; oil falls on mixed supply report

At the pump, the average national price of a gallon of regular gas rose 2.6 cents overnight to a record $3.758 a gallon, according to AAA and the Oil Price Information Service. Gas prices are 67 cents higher than a year ago, and are expected to continue rising at least until the Memorial Day weekend.

The Energy Department recently forecast that prices will peak next month at a monthly average of $3.73 a gallon. But that means prices may rise well above that level at times; many analysts expect prices to reach $4 a gallon on a national basis in coming weeks.

Gas prices typically peak around Memorial Day, then decline through the summer. But some analysts are beginning to question whether that will happen this summer, noting that oil prices have doubled over the past year and show little sign of slowing their advance.

High fuel prices have cut demand for gasoline and oil, but that has had little impact on prices. In its weekly inventory report, the Energy Department's Energy Information Administration said gasoline demand fell slightly last week.

"As the Memorial holiday approaches and with it, the unofficial start to the summer driving season, we wonder if the gasoline market in the United States has finally reached ... the point at which consumers alter their purchasing behavior based on the dollar rise in gasoline at the pump," said Stephen Schork, an analyst and trader in Villanova, Pa., in a research note.

A sharper downturn in demand could pull gas prices lower, analysts say. There are already indications high prices are prompting some people to change their summer travel plans. A new Rand McNally survey says two-thirds of Americans planning road trips this summer are either altering their plans to shorten their trips or canceling altogether.

Meanwhile, light, sweet crude for June delivery fell $1.58 to settle at $124.22 a barrel Wednesday on the New York Mercantile Exchange. The EIA report said crude inventories rose by 200,000 barrels last week, less than the 2.5 million barrel jump analysts surveyed by research firm Platts had expected. But the report also said gasoline demand fell slightly over the last four weeks, and that inventories of distillates, which include heating oil and diesel fuel, grew by 1.4 million barrels last week, 27 percent more than expected. June heating oil futures fell 8.11 cents to settle at $3.6178 a gallon.

Also pressuring oil prices Wednesday was the dollar, which strengthened against the euro. Commodities such as oil lose their appeal as inflation hedges when the dollar rises. Also, a stronger greenback makes oil more expensive to investors overseas.

Oil futures hit a trading record of $126.98 a barrel Tuesday. Oil prices may be more volatile in coming days as investors square positions ahead of the June contract's expiration next week.