Oil markets aren’t peaking early, but one can’t say the same about bullish rhetoric, particularly within the general press.  If you google “$4 Gas” in the news search this morning, you will see over 2,000 stories on the subject.  Yes, we are heading toward $4.00 gal gasoline, but quite a bit has to happen for that number to become the standard, or as some folks opine, a nostalgic number that we’ll talk about with great reverence in the next decade.

I believe that retail gasoline will make a bigger move in March and April, but not necessarily against the backdrop of $100-$102 bbl crude. Crude prices still appear to be excessive, but excess can persist for many months in any market that features lots of speculation, investment, and “spin” of the news to accommodate the desires of those who believe that oil is a safe house for money.

The drivers so far in 2008 have been the usual suspects. The perception of tight global supply of crude has been the B-12 shot that has been injected into the oil market’s buttocks, but money flow from investors and speculators has clearly been the critical performance enhancer. The money being bet (invested) in higher prices dwarfs the money being bet on a price correction or trend change, and the imbalance in long-versus-short speculation is measured in tens of billions of dollars.

 Here are today’s numbers with some quick observations and back-of-the-envelope historical comparisons.

   Nationwide gasoline prices edged higher to $3.161 gal today, about 6cts gal short of the Memorial Day weekend. Prices have consistently been around 75-80cts gal above 2007 levels in the 59 days of 2008. If that edge is maintained, we could expect that a $4.00 gal national average might be reached in late May.  I do not believe that we will get there for the national average, and calculate that $3.50-$3.75 gal is the more likely target.

 For detail on these numbers, visit www.fuelgaugereport.com

   Nationwide diesel prices hit $3.627 gal today. While not as sexy or capable of inflicting as much emotional pain, the value of diesel is critical to the U.S. inflation story. Prices are now just shy of $1.00 gal higher than they were last year.

  It is cold in the northeast this morning, and retail heating oil prices are in the $3.50-$3.75 gal range through New England and the Middle Atlantic. Until the 2007-2008 Winter, the high water mark for home heating oil values was perhaps $2.75 gal. Current prices represent a new record and considerable pain to customers still likely to receive deliveries through April.

 Here’s a quick comparison of how the higher costs impact the teeming masses. The aggregate expenses are adjusted based on approximate demand levels for past years, and uses most current EIA data for 2008 levels.

                            GASOLINE COST COMPARISON 2002-2008

 Year          Average Daily Price     Average Per Diem Outlay    Jan/Feb total bill

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

2008              $3.035 gal                        $1.15-billion                     $67.85-billion*

2007              $2.238 gal                       $845.8-million                   $49.90-billion

2002              $1.125 gal                       $392.0-million                   $23.13-billion

*With one more day left, thanks to Leap Year.

   One more footnote: Ohio and Texas are the next states where presidential primaries will occur. Ohio retail prices for gasoline are at $3.132 gal today, about 70cts gal above where they were last year. Believe it or not, the upper Great Lakes represent one of the weakest U.S. markets at the moment, so we may not see much further acceleration in price between now and primary Tuesday.

   Texas retail gasoline prices are at $3.069 gal today, or just 1.6cts gal shy of the all-time May 23 record of $3.085 gal.  This record will probably fall by next Tuesday, albeit by a slim margin. Prices are about 80cts gal above where they were one year ago.