Gas prices face pressure from Wall Street shake-ups, hurricanes

The price of oil on Monday jumped as high as $25.45 above its previous close on news of the federal government’s $700 billion financial rescue plan. Oil eventually settled at $120.92 a barrel, up $16.37, its biggest ever one-day gain.

Prices Tuesday swung below $107 a barrel as investors cashed in their profits and the dollar regained strength it lost with news of the bailout.

The quick spike Monday was a result of oil speculators, who bet that oil prices would fall, rushing to cover their positions on the final day before they would have to take physical delivery of the crude oil.

“Yesterday was just an anomaly, just a reminder that there’s vast speculative forces there that can really change things,” said Chris Lafakis, an associate economist and gas expert at Moody’s.

Fuel prices have steadily fallen since jumping to a record national average of $4.114 a gallon on July 17. A gallon of regular shed about a penny overnight to a new national average of $3.726, according to AAA.

In the Baltimore area, the average price of a gallon of regular gas fell slightly Tuesday to $3.61 from $3.62. The price was up from a month ago, when it was $3.54 a gallon, but still down from a high in mid-June of $4.02 a gallon.

Whether or not the one-day jump has a major effect, experts said gas prices could come under pressure from several directions, including general market instability and the federal government bailout.

Hurricanes Gustav and Ike also knocked Gulf Coast oil production offline for more than a month, leading to shortages across the Southeast.

“It’s like the whole system is having trouble rebooting, that’s the regional issue [in the Southeast],” said Byron King, a fuel and oil expert with Baltimore-based Agora Financial. “And yes, $700 billion is inflationary, that’s going to drive down the value of dollar. Just on that alone, the price of oil will go up.”

The Associated Press contributed to this story.

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