Motorists in California and nationwide caught a small break at the gas pump last week, but a renewed surge in oil prices Monday could make it a short-lived reprieve.
Crude futures jumped $1.16 to $74.40 a barrel on the New York Mercantile Exchange as continued fighting in the Middle East rattled traders. Natural gas prices surged 14% to a near-six-month high on concerns that a heat wave blanketing the Midwest and Northeast would drive up demand from power producers.
The action in the futures markets took the edge off any optimism that might have followed the latest federal gasoline price survey. The Energy Department reported that pump prices in California slipped last week for a second straight week and were virtually flat nationwide.
"We're still worried about what happens in the Middle East and what happens in Nigeria," said Phil Flynn, senior market analyst at Alaron Trading Corp., referring to recent attacks by Nigerian rebels on production facilities in that country.
"If anything happens to disrupt supply in either of those areas, it could cause [gasoline] prices to go back up."
Economists have watched nervously as oil prices hit record levels this summer, dragging gasoline prices along for the ride. Because filling up their vehicles takes a bigger bite out of their wallets, consumers have cut back on other spending -- a key reason the economy is slowing.
So far, though, high prices haven't curbed Americans' driving habits. Although polls show that consumers say they are cutting back on their driving, government statistics indicate that demand is growing compared with last year.
The airline industry is experiencing a similar phenomenon. Faced with record jet fuel prices and a forecast industrywide fuel bill of $38.4 billion this year -- up from $12.7 billion in 2002 -- carriers have jacked up fares and cut back on flights.
But airliners are taking off with record-high load factors -- the percentage of seats filled -- and most airlines are reporting strong financial results for the second quarter, traditionally the industry's strongest.
"It's amazing. Air travelers are continuing to book in almost record numbers this year," said Terry Trippler, an analyst with Myvacationpassport.com, a fledgling travel membership program. "Based on advance bookings, post-Labor Day travel is up 7% to 9% over last year."
One reason is that air travel gets more price-competitive the higher gasoline prices climb. Another, Trippler said, is that Americans are reluctant to skip a vacation.
