Libya clashes cut oil supply, raise prices

Oil prices continued to set new post-recession highs Monday as forces loyal to Moammar Gadhafi pounded rebels near a key oil port in Libya. It's unclear how long the country's oil exports will be cut off, and traders prepared for a worst-case scenario in which world supplies would be under pressure for months.

Benchmark West Texas Intermediate crude for April delivery gained $1.02 to settle at $105.44 per barrel on the New York Mercantile Exchange. The price almost hit $107 earlier in electronic trading, which would have been the highest level since Sept. 26, 2008.

In London, Brent crude fell 93 cents to $115.04 per barrel.

The rise in oil is driving U.S. gasoline prices to levels that weren't expected for at least another month. Pump prices have jumped an average of 39 cents a gallon since the Libyan uprising began in mid-February, costing motorists $146 million more a day for the same amount of fuel.

The national average hit $3.509 per gallon Monday, according to AAA, Wright Express and Oil Price Information Service. That's up 14 cents, or 4 percent, over the past week. The week before, the average rose 20 cents, the steepest increase since September 2008.

A year ago, the price was $2.75. The average is the highest it's ever been this time of year, and analysts expect it to climb higher in the coming weeks. [On Long Island, the average was $3.734 Monday, up more than 11 cents in a week.]

Libya, which sits on the largest oil reserves in Africa, has been engulfed in a four-week rebellion as militants try to oust Gadhafi after 41 years in power. Officials in the country say oil fields continue to operate, but daily exports of 1.5 million barrels could be cut off for some time.

Other OPEC members are ramping up production to make up most of the loss. The Financial Times reported Monday that Saudi Arabia, Kuwait, the United Arab Emirates, and Nigeria are planning to put another 1 million barrels per day total on the market.

Also, the Obama administration is evaluating whether to tap U.S. strategic oil reserves to slow the rising price of oil. A White House spokesman said officials will base that decision on a variety of factors, including the flow of oil to the United States. The government started to stockpile oil after the 1973 Arab embargo.

Price of a gallon of regular gasoline on Long Island

 Monday $3.734

Sunday $3.726

Feb. 28 $3.620

Feb. 7 $3.406

Year Ago $2.889

SOURCE: AAA