The price of light, sweet crude oil just kept on rising in New York trading Wednesday, ending the day at a record-shattering US $132.72 a barrel.
Meanwhile, the futures market also pushed prices at the pump higher as regular gas rose to a new record of more than $3.80 a gallon south of the border.
Prices are expected to hit $4 a gallon within the next month -- the equivalent of about US$1.06 a litre.
"That's a fait accompli at this point," said oil industry analyst Linda Rafield.
Higher fuel prices are not just taking a toll on drivers. Air passengers are beginning to feel the pinch.
American Airlines has announced it will charge customers $15 to check in a piece of luggage beginning in mid-June. Carry-on luggage will still be included in the price of the flight ticket.
Earlier this month, Air Canada and WestJet Airlines announced fuel surcharges to the price tag of tickets to cover their increasing expenses.
The weekly U.S. oil inventory report on Wednesday morning showed crude oil inventories fell by more than five million barrels. Analysts had predicted a modest increase.
The price of oil also set a new record on Wednesday in Asian markets, surpassing US$130 per barrel for the first time. The high price was driven largely by a weak U.S. dollar and concerns about supply.
BNN's Michael Kane said contracts being negotiated for the sale of light, sweet crude in August, September and October were all using prices above the $130 mark -- twice what they were just one year ago.
Some of Wednesday's oil buying was driven by concerns that OPEC won't increase its crude production before September.
Oil futures are now selling for roughly twice what they were a year ago. Prices have soared because of a number of factors, including worry about insufficient supply, skyrocketing global demand and a weaker U.S. dollar that has made oil cheaper for some overseas buyers.
Kane said that Saudi Arabia has increased its oil production in May by about two per cent but that has done little to quell supply worries.
Some analysts say that there could be a market correction down the road. They say crude prices have risen well above rates related to supply and demand. That could mean a cut in prices.
"It's very difficult to call when this is going to happen, but when it happens, it's going to be quick and ugly," said Phil Flynn, an analyst with a Chicago trading firm.
With files from The Associated Press
