Gas hits new high — $3.47 per gallon

Utah's price is 15 cents below national average

Gas prices in Utah climbed 21 cents in April, reaching a new average high on Thursday of $3.47 per gallon for regular unleaded, according to AAA.

The forces contributing to the ongoing increase in gas prices — it cost $3.01 a gallon May 1, 2007 — are local, global and even seasonal.

While gas in Utah is climbing toward $4 a gallon, it is still 15 cents lower than the national average of $3.62 a gallon.

Seasonally, gas tends to be more expensive in the summer because refiners mix alkylate into it. The additive is necessary for summer gas blends, helping curb pollution from tailpipes and slowing gas evaporation in hot weather.

"It's a more expensive blend," said Rolayne Fairclough of AAA Utah. "But in itself, that's certainly not the reason gas prices are high."

Also contributing to high gas prices is the declining value of the dollar in comparison to other currencies. When the price of the dollar is weak, commodities such as oil gain value.

The dollar's rise against the euro and other currencies this week stripped away some of oil's appeal to investors who have been betting for months that the greenback would continue to falter. When the dollar gains ground, commodities such as oil lose their value as a hedge against inflation, prompting selling. Also, a stronger dollar makes oil more expensive to investors overseas.

A jump in the dollar and the end of an oil workers' strike in Nigeria sent crude prices falling Thursday as speculators who had driven crude futures to nearly $120 pulled out of the market. As the dollar has strengthened this week, oil futures have dropped more than $7 from their highs to their lowest levels since April 14. On Thursday, light, sweet crude for June delivery fell 94 cents to settle at $112.52 a barrel on the New York Mercantile Exchange, after trading as low as $110.30. Meanwhile, the euro bought $1.5457 in afternoon trading, down from $1.5642 late Wednesday.

Analysts caution that oil's swoon could be temporary. The dollar's protracted decline has been a major factor behind oil's rise from about $64 a year ago, and future dollar weakness could easily push crude futures above $120.

"Gas prices are high because the barrel of oil is so high, and gas prices are high because the dollar is so weak, and the stock market is weak," Fairclough said.

The economic forces of supply and demand are also at work, but not in the usual ways.

"In the first quarter, the United States actually decreased usage and decreased demand, and refineries slowed down production to accommodate this decreased demand," Fairclough said. "Ten years ago, if there had been decreased demand, the price of oil would have plunged down. (The price) did nothing because what you have is the demand was offset by China and India and these burgeoning economies (that need oil.) We're looking at a whole different market than what we've had before."

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