Oil prices rocketed higher Tuesday, building on Monday’s gains, and breaking all time global records for crude oil, heating oil, diesel, jet fuel, and kerosene. Gasoline futures hit a new 2007 high but physical prices (values for gasoline in the huge bulk markets) were generally a dime or more short of the highs reached in May and June.

   We’ll see some very significant retail price increases in the next few days. That means that the slight downtick in pump prices witnessed last week will prove to be nothing more than a head fake. The entire year has featured many such head fakes, and if truth serum were administered, most analysts might agree that 2007 has acted like a bobble head doll on steroids and speed.

   Today’s numbers: The January futures price for WTI crude settled at $98.03 bbl today, up $3.39 bbl on the day. It’s the highest settlement price ever - - but we didn’t top the ultimate intraday price top of $98.62 bbl reached on November 7. We may break that record before this page is viewed by those in the ether world.

   Heating oil futures closed at a record $2.690 gal, up 8.59cts gal today. Gasoline futures (technically . . .  gasoline blendstock) settled at $2.4515 gal.

   U.S. retail gasoline prices averaged $3.09 gal today, up some 85.5cts gal from same day last year, but still short of the record $3.227 gal hit on May 24, 2007. Retail diesel prices actually eased to $3.45 gal, a tad below the record $3.459 gal hit yesterday, but new records will be shattered later this week. It is a virtual certainty that nationwide retail prices for diesel will surpass $3.50 gal by the weekend. For daily details, visit the AAA FuelGauge report that OPIS compiles at www.fuelgaugereport.com

   Diesel is sky high because the rest of the world is paying huge numbers for what are known as the “middle distillates” - - products such as heating oil, diesel, kerosene, and jet fuel. As crazy as the U.S. markets are, it’s even nuttier in Europe where the population depends on heating oil and diesel to warm their homes and to fuel their vehicles. The wholesale price for the cleanest lowest sulfur diesel fuel topped $3.00 gal in Europe this morning, which translates into $126 bbl.  European trading companies are buying diesel and heating oil with a zest that they normally reserve for warm beer, mimes, nihilist theater and Jerry Lewis movies.

   Because European prices have been 10-25cts gal above U.S. prices, we’ve seen a fairly brisk export business for diesel this year, moving from the Gulf Coast to various international ports of call. The U.S. is part of the global market, and still imports much more fuel than we export (foreign gasoline accounts for more than 1-million bbl per day of U.S. supply) but I wouldn’t be surprised to see some politics surface as the consequences of global markets get politicized.

   This may become a hot button issue as presidential candidates spend more time in New England.  Some of the people with very marginal incomes in states like Maine or New Hampshire don’t use natural gas, propane, or heating oil to warm their homes - - they use kerosene. The average wholesale price for kerosene is approaching $3.25 gal – I’m not quite sure what it might cost to procure 50 gallons for an RV or trailer park in Maine, but instinct tells me that prices could approach $4.00 gal.

Where To Expect Gasoline To Go With The Status Quo

   This column regularly stresses that retail gasoline prices follow wholesale numbers, albeit on a slightly delayed basis. It’s reasonable to perform an exercise where one takes the current wholesale price and through the wonders of modern arithmetic, projects the values likely to frequent the American roads.

   I’ll repeat the rules of thumb that I’ve used before.  The average federal, state, and local taxes add up to about 45cts gal in your average county, if such a thing existed (there are plenty of variations of course).  The average mark-up and costs of putting the gasoline into a station result in another 15cts gal on top of that number. So, if one takes the wholesale price and adds 60cts gal, one can get a pretty good idea of where retail stasis might be.

  Here’s a look at where wholesale prices were in various bulk markets across the country at the close of business Tuesday.  In the second column, I’ve added the 60cts gal so you can get a regional idea of likely target numbers on the street.

Region                  Approximate Wholesale Price       Projected Retail Price

--------                        ------------------------------------        --------------------------

Northeast                      $2.46-$2.55 gal                        $3.06-$3.15 gal

Southeast                       $2.43-$2.50 gal                        $3.03-$3.10 gal

Midwest                         $2.42-$2.50 gal                        $3.02-$3.10 gal

Rockies/West Coast     $2.52-$2.60 gal                         $3.12-$3.20 gal

   Yes, I realize that states like California, New York, and Michigan already have higher prices, but I’m really making a larger point here. We may a couple dozen counties that now feature gas for less than $3.00 gal move north of that mark. We may see a slight uptick where prices are in, say, the $3.20-$3.45 gal range.

   But we should not see U.S. gasoline prices in any of these states make a pass at $4.00 gal, even with today’s record close for crude. I noted in an earlier post that CNBC master-of-all-punditry Jim Cramer declared two weeks ago that retail prices would hit $4.00 gal in six weeks.

   He has four weeks left for his prediction to be on the mark, and I’m betting he’s way, way off. But  if you’re unfortunate enough to need kerosene to heat your home, you may pay $4.00 gal by December, and retail diesel and heating oil may soon surpass $3.50 gal.