CHICAGO (AP) -- Analysts say higher gas prices and an uptick in airfares can be expected if a nine-month-long surge in crude oil prices continues.
The prices reached their highest level since the $32-a-barrel days of the 1991 Persian Gulf War on Thursday, increasing to $26.80 on the New York Mercantile Exchange before profit-taking shaved a dollar.The latest increase prompted speculation that $30-a-barrel prices could come by year's end.
"Those SUVs are going to be pretty expensive to run," said John Kilduff, senior vice president of energy risk management for Fimat USA, a New York futures brokerage firm.
He said if a $30-per-barrel price is reached, "you're probably looking at a nationwide average of at least $1.50 a gallon for gas, higher in places like New York and high-tax states and probably over $2 a gallon in California," he said. "That's going to be shocking for people."
Currently, the nationwide average price of a gallon of regular grade gas is $1.25.
Higher costs on products ranging from plastic goods to virtually anything that is shipped also are likely fallout from oil price increases.
While analysts have been downplaying the significance of oil's rise so far, there's concern that continued increases could drive up the overall inflation rate. That could perhaps prompt another interest rate increase by the Federal Reserve Board.
"We've been blessed by low inflation, which has kept the U.S. economy booming," said Leo Drollas, chief economist for the London-based Center for Global Energy Studies. "This is just giving it a kick when it's not needed.
"There's no cause for alarm. But there's cause for concern."
Oil's phenomenal price runup took off last March when the Organization of Petroleum Exporting Countries and key allies, disconcerted by plummeting prices and a world glut, cut production by 2.1 million barrels a day -- 2.6 percent of world totals.
Except for a dip from $25 to under $21 this fall, it has continued unabated as OPEC members have largely adhered to the lower production levels. Now they are widely considered likely to extend them past their scheduled expiration in March.
With crude oil inventories near a two-year low, OPEC is still largely complying with the cutbacks. With the arrival of colder weather that increases demand, analysts say there's no end in sight to oil's rise.
Americans have grumbled about higher gas prices, though high demand signals they have largely shrugged them off. But Kilduff says the latest spike will be more noticeable in the coming weeks as gas retailers, airlines and shippers pass along higher costs to consumers.
"We'll probably have a good six months or so of inflated energy prices that we'll have to deal with," he said.
Ironically, experts say, while OPEC's strategy is paying off in the short run, it will hurt long-term demand because soaring prices have drawn other producers into the market to fill the gap.
Western officials, worried that the decline in oil stocks leave them more vulnerable to market swings, hope OPEC nations grow uncomfortable with the surprising surge in prices and end the cutbacks soon for the sake of market stability.
"The higher the oil price goes, the greater the danger the whole (market) could unravel," said Mehdi Varzi, a London-based oil industry analyst for the investment bank Dresdner Kleinwort Benson.