Gasoline pump prices reached a 28-month high today even though oil and gas supplies in the U.S. continue to grow and demand for gas is weak.

The national average for regular gasoline rose to $3.133 a gallon. That’s about $1.20 more than the price at the pump two years ago, according to AAA, Wright Express and the Oil Price Information Service.

Just eight states have average prices less than $3 a gallon. The cheapest – $2.94 a gallon – is in Missouri. Hawaii has the highest average of $3.746 a gallon.

Tom Kloza, OPIS chief oil analyst, predicted gas prices will range from $3.50 to $3.75 a gallon this spring and then drift lower, to between $3 and $3.40 a gallon.

“I do believe that this year is front-end loaded,” Kloza said. “I think that perhaps the first third of the year sees higher retail prices for gasoline and diesel than the middle or final thirds.”

Average gas prices have climbed steadily from about $2.80 a gallon in November even though consumer demand has been weak and inventory levels remain high. The Energy Department said today that supplies of crude and gasoline both rose again last week while distillates, which include heating oil and diesel, declined. All three products are at or above the average range for the past five years.

Higher gas prices are a result of several factors that have created a bottleneck for supplies of West Texas Intermediate crude stored at Cushing, Okla., which is the delivery point for oil traded on the New York Mercantile Exchange.

More North American oil is being produced and delivered to the Cushing facility, but existing pipelines can’t move all of the crude out to refineries. And there are no pipelines to Gulf coast refineries, which have the capacity to produce about half the nation’s daily supply of gasoline.

In addition, the price of Brent crude, used by refineries on the East Coast, is soaring. Although it’s produced in Europe’s North Sea, Brent is used to price oil produced in other parts of the world, including South America and Africa, which are shipped to refineries in the U.S.

The prices of Brent and WTI climbed today as labor protests continued in Egypt and anti-government demonstrations broke out in Libya. Traders are worried that spreading unrest in the Middle east will disrupt oil production and shipments in the region.

Copy the Story Link