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With oil prices rising, brace for more pain at the pump

WASHINGTON—Oil prices jumped $1.95 a barrel Thursday and $3.20 over the past two days amid seasonal shutdowns at U.S. refineries and escalating tensions in the Persian Gulf region. That means rising gasoline prices in the weeks ahead.

Oil prices settled at $66.03 at the close of trading Thursday on the New York Mercantile Exchange, the highest closing price since last September.

"There are just so many bullish factors pushing prices higher," said Michael Fitzpatrick, the vice president of energy risk management at FIMAT USA, a commodity brokerage in New York.

Among them are U.S. refinery shutdowns to switch to producing summer fuels, a strike in France that's affecting European supplies and oil traders' fears that Middle East tensions could erupt into violence.

Oil prices surged more than $5 in overnight trading Tuesday on an unfounded rumor that Iran had fired a missile at U.S. warships that are conducting a training exercise in the Persian Gulf. Adding to the tensions, Iran is holding 15 British sailors who it claims intruded into its territorial waters last Friday, a charge that British Prime Minister Tony Blair denies.

Until that diplomatic deadlock breaks, oil prices may remain at $65 to $68 a barrel, Fitzpatrick said. An outbreak of fighting could send prices to record highs.

"If Iran closes off the Strait of Hormuz, it could go even higher," he said, suggesting that Iran may be provoking a crisis to drive up oil prices and boost its economy. "Clearly they are going to try to get some mileage out of it."

For motorists, this means gasoline prices will remain high and probably go higher. The nationwide average for a gallon of regular unleaded gasoline Thursday was $2.62, a March record, according to the AAA motor club. That's up from $2.37 a gallon a month ago and $2.50 a gallon a year ago.

"Usually the increase is not this early in the year, so that's a bit of a disappointment," said Mike Pina, a spokesman for AAA in Washington. "We're still not at the point where we were at $3.00 a gallon last summer. When it gets that high, people start rethinking their travel plans."

The U.S. Energy Information Administration on Wednesday warned of persistent high gasoline prices.

"Until gasoline production and imports both increase substantially, retail (gasoline) prices are not likely to experience a noticeable downturn," the agency wrote in its weekly report. "The good news is that supplies may have begun to increase. How quickly they increase relative to the expected demand increases will likely determine when prices may start heading lower."

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(c) 2007, McClatchy-Tribune Information Services.

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