With oil setting yet another record high Friday of $127.43 per barrel and Goldman Sachs renewing traders concerns about inadequate oil supply growth, economists and business executives are becoming increasingly concerned about gasoline prices in the quarters ahead.

U.S. gasoline prices are already up more than 100% since 2004 to a national average of about $3.78-3.83 per gallon. (Many high-cost zones, such as New York, Boston, San Francisco, and Los Angeles, are already experiencing prices well over $4 per gallon.) By any gauge, gasoline's surge is one for the record books - - rapidly approaching percentage increases registered during the first two oil shocks, in 1973-74 and 1979-80.

Given the run-up, how much higher can gasoline prices rise?

First, some may ask, why the emphasis on gasoline prices? In a nutshell, economists obsess over gasoline prices because, unlike the rest of the developed world, the United States has out-sized per capita energy consumption. That's econospeak for 'Americans use many more gallons of fuel to commute to work, do errands, etc. than their counterparts in Europe and around the world.'

Oil prices rose to a record $127.43 Friday morning amid new concerns about supply and after Goldman Sachs increased its forecast to $141 per barrel for the second half of 2008.

Goldman upped its forecast by 32%, saying oil prices will average $141 in 2008 and $148 in 2009, citing supply constraints and the lack of scalable substitutes, Bloomberg News reported Friday.

Oil surged on the news before easing back to $127.33. The other major energy commodities also jumped in early Friday trading. Heating oil added 5 cents to $3.67 per gallon, unleaded gasoline jumped 6 cents to $3.22 per gallon, and natural gas climbed 13 cents to $11.53 per million BTUs.

Economist Glen Langan told BloggingStocks Friday that Goldman Sachs' increasingly bullish outlook for oil is not good news for consumers or the U.S. economy.

"This is the first time that I can recall that a major investment bank has mentioned the supply dimension to oil. Up to now, we've been talking about emerging market demand, but if in fact supply will not increase at modern-day historical rates, this is not a good sign for U.S. GDP growth," Langan said. "We're counting on ample supply growth to contain these already high oil prices."

Langan said he expects oil production to grow at least 1.5-2% per year, while Goldman sees it at 1% per year. "If Goldman is correct, prices will rise to over $140 per barrel in the quarters ahead this year, and probably higher, that would put the average price of gasoline in U.S. easily over $4.25 per gallon," he said.

Oil is treading water at a near-record $125 per barrel after a U.S. Energy Information Administration report indicated that weekly crude oil inventories rose a considerably smaller-than-expected 200,000 barrels. Economists surveyed by Bloomberg News had expected crude oil inventories to increase by 2.25 million barrels last week.

Gasoline supplies fell 1.7 million barrels.

The modest increase in oil inventories had little affect on oil prices, for the moment. Oil was down 87 cents to $124.93 per barrel in Wednesday morning trading. The other major energy commodities were also virtually unchanged. Unleaded gasoline fell 1 cent to $3.18 per gallon. Heating fell about 2 cents to $3.66 per gallon. Natural gas gained 10 cents to $11.52 per million BTUs.

Meanwhile, refineries operated at 86.6% of capacity for the week ended May 9, 2008, the EIA report indicated, up from 85.0% in the week ended May 2, 2008.

A bright spot: Refinery utilization

Independent energy trader Jim Dietz told BloggingStocks Wednesday the increase in refinery utilization was the report's lone bright spot.

Consumer prices rose 0.2% in April 2008, the U.S. Labor Department announced Wednesday, a statistic below the consensus estimate as oil prices moderated during month, offsetting rising food prices.

Economists surveyed by Bloomberg News had expected April 2008 consumer prices to increase 0.3%. Consumer prices increased 0.3% in March 2008.

Also, the core rate, which excludes the frequently-volatile food and energy component, rose just 0.2% in April 2008, inline with the Bloomberg News survey 0.2% consensus estimate.

On a year-over-year basis, consumer prices have risen 3.9% and the core rate has risen 2.3%. The core rate remains slightly above U.S. Federal Reserve's 'comfort zone' for inflation. The Fed uses the core CPI rate as one of its primary gauges of consumer-based inflation.

April 2008 CPI: 'Surprisingly tame'

Economist David H. Wang said the April 2008 CPI report was a bit of a surprise -- one that may help the U.S. economy. "The report was surprisingly tame. We do see rising food costs, but the energy component was not as bad as expected," Wang said. "Also, core year-over-year inflation is not too bad, and the Fed [U.S. Federal Reserve] will look favorably upon this, if it remains moderate."

Oil prices are down a bit after trading up close to $127 a barrel yesterday on fears that production cuts could be coming out of oil rich Iran.

While the chatter out of Iran could be just that, idle chatter, there was still enough of a reason to spook investors into pushing crude oil up significantly Tuesday, leading to a closing price last night of a pretty remarkable $125.80. Prices hit a high Tuesday of $126.98.

One of the main factors that has led to the current record high prices is the weak U.S. dollar. Yesterday, the dollar actually rose a bit, but traders looked past that data and instead decided that any sort of production cut rumors coming out of Iran warranted more attention.

An economic slowdown in the United States and other industrial nations will continue to damper oil consumption growth, the International Energy Agency announced Tuesday, as it again trimmed its global oil demand estimate for 2008.

The IEA lowered its forecast for 2008 global oil demand by another 390,000 barrels to 86.8 million barrels per day from about 87.2 million barrels, the association announced in its latest monthly report. At the same time, the IEA revised its analysis of 2007 oil usage, saying the world used about 85.8 million barrels per day last year.

Oil traded $1.50 higher to $125.70 per barrel in Tuesday afternoon trading. Oil hit an all-time high of $126.98 in electronic trading earlier in the day and has risen about 100% in the past 12 months.

Consumers are really going to be feeling the pain next weekend when they hit the road for Memorial Day weekend.

Gasoline prices have risen to yet another new high today, climbing to a national average of $3.73 as the summer driving months are on our doorstep.

Sadly, gasoline prices are showing no signs of cooling, and many analysts have already predicted $4 a gallon by the middle of the summer. At the current pace, $4 gasoline may seem cheap before it is all said and done.

The main reason for the price acceleration is, of course, crude prices. Oil prices have doubled over the past year and sent gasoline prices through the roof. Oil prices are still showing no signs of cooling off either, and are still trading above $125 a barrel. This is causing many analysts to question whether this year we will see the typical gradual decline of oil prices through the summer.

I know that last thing you probably wanted to hear this morning was that oil prices moved even higher, but that is exactly what is taking place, as oil rose as high as $125.98 and is currently trading at $125.60.

Leading the charge today is the weak dollar as investors continue to seek refuge from the falling U.S. currency in commodities -- most notably, oil. The dollar has fallen today against the euro, the British pound, and the Japanese yen. The euro was sitting at $1.5404 last night, but has moved higher today, up to a current price of $1.5466.

The market is also concerned about the upcoming peak driving season for Americans. With the season getting under way, oil prices will definitely continue to rise, and if gasoline stockpiles continue to fall, you can be sure that gasoline prices are also going to keep moving higher over the next couple of months. Will we see national averages of $4 or greater? I don't think so, but at the current rate prices are moving, nothing is out of the question right now.

An OPEC official said Friday the cartel may meet to boost output ahead of its September 2008 meeting if crude oil prices keep rising, Reuters reported Friday.

"If the price keeps going up, OPEC may consult on an increase in production before it meets in September," the OPEC source told Reuters Friday, speaking on condition that he not be identified. He added that the increase "would have to be more than 500,000 barrels per day" to have an impact.

Oil Friday hit another record high, increasing $2.20 to $126.20 per barrel Friday morning, before easing back to $125.25, on concern about production in Nigeria amid civil unrest, and on emerging market oil demand growth, particularly in China and India. Further, institutional investor demand for oil as an asset class is also contributing to oil's record rise, many analysts agree.

'Two years, $75 late'

Economist Glen Langan told BloggingStocks Friday talk of a potential OPEC action on production is two years too late. "OPEC is two years, $75 late, I'm sorry to say," Langan said. "OPEC knew for two years that higher production was needed to help meet unprecedented emerging market demand, but they failed to act in the interests of the global economy."

Readers of this space know that one of the preferred sectors has been the oil/oil services sector. Further, with oil now well above $110 per barrel, one may think that all of the affordable oil plays have been bid up. Indeed, most have, but not Chevron.

Chevron Corporation (NYSE: CVX) is the third-largest integrated oil company in the United States.

Chevron's organic reserve replacement, excluding Canadian oil sands, is sub-par, but just about every other dimension of CVX's operation rates good to strong.

Chevron's most attractive dimension? CVX has the equivalent of 'the facilities of significance' in an oil-challenged world, and especially in a gasoline-challenged United States: 22 fuel refineries, to go along with 2 asphalt plants, for a total refining capacity of 2.21 million barrels per day. Almost half of that fuel refining is based in the United States.

As serious as the oil issue is in the United States, the west, and globally, considering its impact on economic development, circumstances could become even more challenging, in the quarters ahead, if present trends continue.

That's because, due to emerging market growth and per capita energy consumption rates in the United States - the oil -producing world "could be in a position of unprecedented pricing power," according to economist Glen Langan.

Langan says "could be" because the pricing power oil producers currently have, while significant, is not absolute. And oil-consuming nations still have time to regain some control over their oil bills. Oil Thursday reached a record high of $123.74 per barrel before closing slightly lower.

Here's the current global oil supply / demand landscape, as Langan sees it: daily global oil supply exceeds demand by the smallest of margins. It's the major reason the price of oil has been trending up for more than 5 years, but oil-consuming nations can increase that margin, via conservation, increased efficiency, and alternative sources of energy.

Oil is treading water -- for now -- at a near-record $122 per barrel Wednesday, after a U.S. Energy Information Administration report indicated that weekly crude oil inventories rose a larger than expected 5.7 million barrels.

Economists surveyed by Bloomberg News had expected crude oil inventories to increase by 1.63 million barrels last week. Also, gasoline supplies rose by 800,000 barrels.

Oil idles near $122

The larger than expected increase in oil inventories put a brake on oil prices, for the moment. Oil rose just 30 cents to $122.14 per barrel in Wednesday morning trading. The other major energy commodities were also virtually unchanged. Unleaded gasoline gained 1 cent to $3.11 per gallon. Heating oil rose about 2 cents to $3.37 per gallon. Natural gas gain 2 cents to $11.15 per million BTUs.

British Petroleum (NYSE: BP) shares are falling today after the US Energy Department reported that domestic gasoline inventories rose unexpectedly last week and crude-oil stockpiles gained more than expected. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BP.

After hitting a one-year high of $79.77 in November, the stock hit a one-year low of $57.85 in January. This morning, BP opened at $72.73. So far today the stock has hit a low of $72.17 and a high of $72.82. As of 12:00, BP is trading at $72.30, down $0.54 (-0.7%). The chart for BP looks bullish and steady, while S&P gives the stock its highest 5 Stars (out of 5) strong buy rating.

For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $80 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in two and a half months as long as BP is below $80 at July expiration. BP would have to rise by more than 10% before we would start to lose money. Learn more about this type of trade here.

The record run of oil, already up a gaudy 400% since 2000, continues, with prices breaking through $122 per barrel on Tuesday, May 6, 2008.

Meanwhile, gasoline prices, up about 20% in the past six months alone, and about 100% in the past four years, show few signs of moderating in the months ahead.

It's the era of high oil/energy prices, and until a readily-available, affordable energy substitute is found and/or oil prices decline, the oil / oil services sector will be in demand, which bodes well for Occidental Petroleum Corporation (NYSE: OXY).

American motorists, already stung by an 80% increase in gasoline prices in the past year, sense that $5 per gallon is ahead, and they may be (regrettably) right.

A CNN/Opinion Research Corp. poll found that 94% of respondents expect to pay $4 per gallon this year, and 78% expect to pay as much as $5, CNNMoney reported Tuesday.

The national average currently is $3.62 per gallon as tracked by the Lundberg Survey, Bloomberg News reported. Many higher-cost areas of the United States -- including New York, San Francisco, Los Angeles, and Boston -- are already experiencing prices over $4 per gallon.

Further, traders and analysts say seasonal, structural, and geopolitical factors are likely to push gasoline considerably higher in the weeks ahead -- with gasoline's upward arc lasting months, if the price of oil continues to rise.

Primary culprit: Rising oil prices

The biggest factor in gasoline's rise is the price of oil, which Tuesday topped $122 per barrel in NYMEX trading for the first time in its history. Oil is up more than 100% since 2006. In November 2001, oil traded at about $17 per barrel. Moreover, because the crude component accounts for more than 60% of the price of a gallon of gasoline, refiners have passed that added cost onto consumers.