NEW YORK - The surging price of oil reached another milestone Monday, jumping to an inflation adjusted record high of $103.95.
The weaker dollar that has propelled oil and other commodities prices higher sent light, sweet crude for April delivery past $103.76 a barrel on the New York Mercantile Exchange. That's the level many analysts consider to be the true record high for oil, after its $38 barrel price from 1980 is translated into 2008 dollars.
The price later traded up $1.81 at $103.65, fluctuating with the normal ebb and flow of trading.
Oil's most recent run into record territory has been driven by the greenback's slump against other world currencies. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.
Gold, copper and wheat are among the other commodities that have rallied in recent weeks as the dollar has fallen.
"It's coming down to another commodity price rally,'' said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.
The dollar has been weighed down by concerns about the U.S. economy and the Federal Reserve's interest rate-cutting campaign. Lower interest rates tend to weaken the currency, which fell Monday to a new low of $1.5275 against the euro.
The struggling U.S. dollar has prompted a wave of speculative buying by oil investors seeking a safe haven from the ongoing volatility of the stock market. Such speculation can become self-perpetuating, driving prices higher and attracting even more speculators.
Many analysts believe oil prices aren't justified by crude's underlying supply and demand fundamentals. While supply disruptions in Nigeria and the prospect of a supply cutoffs from Iraq and Venezuela helped boost oil prices last year, domestic oil inventories are now rising even as a number of forecasters are cutting their demand growth predictions due to the slowing economy.
Prices were also supported Monday by tensions between Venezuela and Colombia over Colombia's killing of a top rebel leader in Ecuador; reports that Ukraine's president threatened a "gas war'' with Moscow after Russia cut gas supplies over a financial dispute; and reports of a U.S. airstrike on a Somali town held by Islamic extremists.
Investors are keeping an eye on OPEC, which meets Wednesday to consider production levels. Most expect the Organization of Petroleum Exporting Countries to hold output steady.
`Unless there's a surprise ... I think it's a non-factor at this time,'' said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos., of OPEC's impact on trading Monday.
As for where oil goes from here, analyst estimates vary widely, with some predicting an eventual decline to the $65 or $70 range as supplies continue to grow and demand falls, and others seeing oil rising as high as $120 as investment capital continues to flow into oil markets from overseas.
For its part, the Energy Department's Energy Information Administration's latest prediction is that oil will average $86 a barrel in 2008, up 19 percent from 2007, when oil averaged $72 a barrel.
Surging oil prices are boosting prices at the pump. The average price of a gallon of gas stood at $3.165 Monday, according to AAA and the Oil Price Information Service. That's down 0.1 cent overnight, but up nearly 70 cents from a year ago. The Energy Department expects gas prices to peak near $3.40 this spring, well above May's record of $3.227, but some analysts predict prices could rise to nearly $4 a gallon.
Diesel prices, used to transport the vast majority of the nation's goods, are also surging. Diesel prices hit another new record of $3.674 a gallon Monday.
Other energy futures also rallied Monday. In other Nymex trading, April heating oil futures jumped 5.58 cents to $2.8627 a gallon, and April gasoline futures rose 5.07 cents to $2.7206 a gallon. April natural gas futures gained 18.4 cents to $9.55 per 1,000 cubic feet.
In London, Brent crude futures rose $1.46 to $101.56 a barrel on the ICE Futures exchange.
