Long Island gas prices expected to continue climb

Middle East tension is inflicting more pain at Long Island fuel pumps -- and prices are set to climb even higher, experts warn.

Those price rises will take a bite out of consumer spending and boost the cost of other products, as transportation and commodity prices rise.

The cost of a gallon of regular gas averaged $3.91 at Nassau and Suffolk gas stations Monday, down a penny from Sunday but 14 percent higher than $3.43 recorded a year ago, said AAA, the travel group. Prices have risen 9.8 percent since Jan. 1.

Crude oil surged to nine-month highs, trading at more than $105 a barrel in the afternoon in electronic trading on the Chicago Mercantile Exchange after Iran halted oil shipments to Britain and France. The move was in response to a new set of European and U.S. sanctions over the Middle East country's nuclear program. There was no official settlement price for oil because of the Presidents Day holiday.

Industry analysts are warning gas prices could soon surpass price levels seen last spring -- when a gallon of regular peaked at $4.28 -- if tensions with Iran escalate.

The situation is already creating a "buying frenzy" in oil markets globally, said energy analyst Phil Flynn, of the Chicago brokerage firm PFGBEST.

Countries in "Asia and Europe are hoarding supplies to avoid having shortages in the event that there is some type of a cutoff from Iran, or if there is a wider conflict," Flynn said. "More and more it seems like the tensions are rising."

Other factors will help boost prices past $4 soon, said Robert Sinclair Jr., spokesman for AAA New York. The temporary refinery shutdowns that typically happen in March as refineries retool to produce summer blends of gasoline create "mini shortages," Sinclair noted. Summer blends are also more complicated to refine and distribute, adding to their price, he said.

Economists warned that higher fuel prices could act as a depressant on the overall economy, pressuring consumer spending. That effect is amplified locally because Long Islanders are more reliant on their cars than, say, Manhattan residents.

Higher pump prices "are obviously going to take more money out of people's pockets, which means they have less money available to spend on other goods and services," said Irwin Kellner, chief economist for the MarketWatch information service, and formerly of Hofstra University.

In addition to hampering consumer expenditures, the high cost of gasoline has widespread ramifications, he said. Prices of food, clothing, building materials and other products will rise because they are transported on trucks. Oil is used to make plastic, so myriad products will cost more.

Retail analysts said Long Island consumers are unlikely to pull back spending dramatically because many may be getting used to bloated pump prices. "It's par for the course and just sort of what we're used to," said Megan Donadio, a Manhattan-based retail strategist for consulting firm Kurt Salmon. "We talked about gas prices a couple of years back and when is it going to go back to normal. The fact is that this is the new normal."

With James T. Madore

Ways to conserve gas

• Slow down. Every 5 miles per hour above 60 is like adding 25 cents to the price of a gallon of gasoline.

Sources: AAA