Gas prices on LI approaching 2008 record

Gasoline prices are approaching the local record on Long Island set more than three years ago, with regular averaging $4.267 a gallon yesterday, the AAA said, but drivers haven't cut back much on consumption -- at least not yet.

Yesterday's average for regular was less than 8 cents shy of the record $4.346 set July 8, 2008, and about $1.14 a gallon higher than a year earlier.

Averages were above $4 in many other major metropolitan areas, including Washington, Chicago, Detroit, Honolulu, Los Angeles and San Diego, but the weekly SpendingPulse report from MasterCard Advisors says demand nationally fell by only 1.2 percent over the past four weeks from the same period a year earlier -- by 1.5 percent in this, the Central Atlantic region. The U.S. Department of Energy pegged the drop at 1.9 percent.

Sander Cohan, gasoline analyst at Energy Security Analysis Inc. in Wakefield, Mass., says that's no surprise because drivers never really stopped conserving after the price run-up in 2008, which was followed by a severe recession. "We still haven't seen demand back to where it was before the last peak in gasoline prices," he said. Most driving, he said, is necessary.

Said MasterCard analyst John Gamel, "We're down, but we're comparing against depressed levels to begin with." Still, he said, sales are declining more on weekends than weekdays. "That kind of tells us people are cutting back on discretionary driving, but people have to get to work and to school, and they're not cutting back on that."

Both men note that small improvements in the jobs market this year should mean higher demand for gas for commuting.

Said Cohan, "The proof will really be in the next couple of months, when we typically see a peak in demand for summer driving, and whether or not the peak is more muted than expected."

He thinks prices are close to peaking for this summer and -- barring a dramatic increase in crude oil prices -- could begin to slowly recede within weeks.

In New York trading yesterday, U.S. crude oil prices fell on disappointing U.S. economic news, word that China planned to tighten monetary policy and higher-than-expected U.S. inventories of crude. Benchmark oil settled at $109.24 a barrel, down $1.81. It was as high as $114.83 earlier this week.

This story is supplemented with reports from Bloomberg News.