Oil prices rising to near 2011 highs

NEW YORK (AP) – Oil prices are approaching last year’s highs as tensions increase over Iran’s nuclear program. The rise pushed gasoline prices on Friday to a national average of $3.65 per gallon, the highest ever for this time of year.

Western nations fear Iran is building a nuclear weapon and have been trying to force it to open its facilities to inspection. Iran has refused, turning away international inspectors this week for the second time this month. The United Nations said Friday that Iran has responded to the recent scrutiny by speeding up production of higher-grade enriched uranium, feeding concerns that it is developing a bomb.

As both sides dig in for a protracted standoff, investors are snapping up oil contracts in case fighting breaks out in the heart of the one of the world’s biggest oil-producing regions. “Everyone’s pricing in the potential for war now,” independent analyst Stephen Schork said. “Without a concrete resolution, nobody knows how high this can go.”

Israel hasn’t ruled out an attack on Iran, and Iran has said it is ready to strike pre-emptively, possibly targeting the Strait of Hormuz, if it is threatened. The Persian Gulf passageway is a potential choke point for oil supplies. One-fifth of the world’s oil tankers pass through it every day.

On Friday benchmark West Texas Intermediate crude rose by $1.94 to end the week at $109.77 per barrel in New York. Brent crude rose by $1.85 to finish at $125.47 per barrel in London.

WTI peaked near $114 a barrel last May, while Brent rose above $126 per barrel.

The price of gasoline, which is made from crude oil, has soared with oil prices. The national average jumped by nearly 12 cents per gallon in a week, with state averages above $4 per gallon in California, Alaska and Hawaii.

It looks like they’ll keep climbing.

Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said pump prices will add at least another 10 to 15 cents per gallon in coming days to reflect a recent jump in wholesale markets.

At $3.65 per gallon, gasoline is still below last year’s high of $3.98 and the record $4.11 set in 2008. Kloza says pump prices are on pace to top both of those in coming months. He thinks gasoline will climb as high as $4.25 per gallon by late April.

The rise will weigh on the economy, pushing leisure and business travel costs higher. Every one-cent increase in the price of gasoline costs the economy $1.4 billon, analysts say.

Prices have been surging particularly on the West Coast where a BP refinery was shut down after a fire.