LI gas prices reach 33-month high

Gasoline prices on Long Island have spiked to the highest levels in almost three years -- and motorists face more of the same.

Regular gasoline jumped to an average of $4.10 Wednesday, the highest in 33 months, and crude oil prices continued to rise, adding to fears that the economic recovery could be slowed or cut off entirely.

Economists increasingly are worried that rising energy prices will slow or choke off the rebound from the recession as transportation and production costs for almost every product rise. Higher gas prices mean consumers are forced to spend more to get to work, have less to spend on discretionary purchases such as restaurant meals, or postpone buying items such as home electronics.

Some experts say gas prices are likely keep climbing and possibly reach an all-time high -- until crude oil's price falls or until Americans cut back significantly on driving, reducing demand and pushing prices downward.

"I don't see anything out there that's going to knock the price down over the next few weeks or even the next month or so," said Dominick Chirichella, senior partner at the Energy Management Institute in New York, which trades, educates energy professionals and publishes newsletters.

He thinks prices could easily tie the records set more than two years ago, when regular topped out at $4.346 a gallon on Long Island, on July 8, 2008.

Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, which provides research and consulting, thinks prices could exceed that average, even reaching $4.50 in this area.

"When and if crude oil prices come back down, gasoline will come back down," he said.

Wednesday's average was the highest since Aug. 7, 2008, the AAA said.

A stream of recent economic data has pointed to consumers spending less on almost everything. Experts have estimated a 25-cents-a-gallon increase in gasoline prices could translate into a decline of 0.2 percent in gross domestic product.

According to a Reuters/Ipsos poll, higher gasoline prices have damaged confidence in the country's future and made some Americans change their spending habits and lifestyles.

U.S. Energy Secretary Steven Chu on Tuesday said in Washington he was concerned that rising crude oil and gasoline prices could undermine a U.S. economic recovery. "We are in a very delicate recovery and we're very concerned that these higher prices will have impact on that recovery," Chu told reporters after an event to promote electric vehicles.

Higher prices have prompted some conservation by American motorists; MasterCard's SpendingPulse report said that, while demand nationally rose by 3 percent last week from the week before, as it usually does at this time of year, it ran 1.6 percent behind the same week a year earlier.

Experts blamed yesterday's crude oil increases on a weaker dollar and an unexpected decline in U.S. crude oil inventories shown in a weekly fuels report by the U.S. Department of Energy.

Experts blame the dollar's decline on the nation's deficit and administration efforts to spur the economy with cash injections. A weaker dollar makes oil, which is priced in dollars, a relative bargain. That increases demand from investors, thus helping to drive up the price.

The nation's gasoline stocks also dropped, the report said.

Crude oil futures have soared this year on a mix of factors, including most recently fears that political unrest in the Middle East and North Africa would spread to major oil producers like Saudi Arabia, causing supply shortages. Chirichella estimates that the so-called fear factor had added $20 to $25 a barrel to crude oil's price and more than 45 cents to the pump prices of gasoline.

OPEC Secretary-General Abdullah Al-Badri put the fear factor at $15 to $20.

In New York trading Wednesday, U.S. crude for May delivery settled up $3.17 at $111.45 per barrel.

In London, the benchmark Brent crude oil, the major ingredient for some of the gas sold on the U.S. East Coast, rose $2.52 to settle at $123.85 per barrel.

With Reuters and Bloomberg