NEW YORK Oil prices dropped Monday on a stronger dollar and a call from Saudi Arabia for a meeting to talk about prices it called unjustifiably high, but gas prices kept marching higher, leaving the $4 mark in the rearview mirror.
The dollar improved against the euro after Treasury Secretary Henry Paulson said he would not rule out intervention to stabilize the U.S. currency. That provided some relief for oil, which is priced in dollars, after a record run-up on Friday.
Saudi Arabia called for a meeting of oil-producing countries. A Saudi minister said the kingdom would work with OPEC to "guarantee the availability of oil supplies now and in the future." He also said the current price of oil is unjustified.
July futures for light, sweet crude fell $4.19 to settle at $134.35 a barrel in volatile trading on the New York Mercantile Exchange. On Friday, oil jumped nearly $11, a single-day record.
But gas just kept climbing. The national average price of a gallon of regular rose 1.8 cents to $4.023, according to AAA and the Oil Price Information Service. The average passed $4 on Sunday, although many parts of the country have paid that for weeks. In Utah, the average price for regular unleaded gas was $3.97 per gallon on Monday.
If oil stays near $139 a barrel, the high it set last week, gas prices will probably rise another dime in the coming days, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.
"The numbers do have some catching up to do," Kloza said. "There's a bit of a tape delay that happens with gasoline."
An AAA spokesman said prices could rise another 2 to 3 cents.
Drivers have shown signs of cutting back as gas prices go ever higher, but gas producers have little choice but to keep raising prices when the cost of their most important raw material, crude oil, goes up.
Already, high gas prices have caused a shift in the types of cars people buy. General Motors Corp. said last week it would close four plants that make pickup trucks and sport utility vehicles.
At today's prices, it costs nearly $91 to fill a Ford Explorer, up from $70 a year ago. A person who drives that Explorer 25 to 40 miles to and from work, not to mention chauffeuring kids around, has to gas up twice a week at least.
A Morgan Stanley analyst's prediction that oil would hit $150 helped drive the rally on Friday. At that rate, gas would cost about $4.40 a gallon, Kloza said.
Gas prices often peak around Memorial Day, then retreat over the course of the summer. But this is far from a normal year. Oil prices have been marching steadily higher since last fall, and sudden drops of $10 or more in oil have been followed by rapid rebounds and new heights.
Last week, oil prices rose nearly 14 percent in two days, trading as high as $139.12 a barrel, after slumping more than $13 from a previous record high.
The sharp jump last week began Thursday, after European Central Bank President Jean-Claude Trichet suggested the bank could increase interest rates in July to counter rising inflation. That sent the dollar falling against the euro.
In an interview on CNBC Monday, Paulson said he would not rule out the possibility of intervening to stabilize the dollar, though he declined to speculate about what the government might do. The dollar strengthened against the euro on Paulson's comments, sending oil lower.
Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens. But on Monday, the effect reversed. The dollar gained ground, making oil less effective as an inflation hedge. Also, a stronger dollar makes oil more expensive to investors overseas.