Fill Up Now: Gas Prices Likely To Rise Again As Oil Surges

Benchmark crude for September delivery was up $1.86 to $71.31 a barrel by late morning London time in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose $2.51 to settle at $69.45.

The cost of oil climbed by three percent after a report that factory output in China advanced to the highest levels in almost a year. Commodities and equities also gained on speculation that a domestic manufacturing index due to be released today will show conditions in July were the best in 11 months.

While gas prices are not expected to approach last summer's wallet-busting $4 per-gallon, experts say they are likely to increase as the recession is showing signs of easing.

Experts say don't blame the corner gas station. The price of oil is pulling gas prices higher. Analysts say investors have been piling into crude as an alternative to a falling dollar. The economic stimulus and Wall Street bailout are helping push the deficit past $2 trillion this fiscal year, igniting fears of a weaker dollar and inflation.

"This is all about money flow," says Tom Kloza, chief analyst at the Oil Price Information Service. Crude prices are also rising on growing expectations that at least a modest economic recovery will begin later this year. The International Energy Agency said Thursday that it expects oil demand to fall less sharply this year than it previously forecast. And with oil companies slashing exploration during the slump, investors are already anticipating a supply shortage and price run-up in a few years.

Oil experts don't expect prices to soar near-term. Oil stocks totaled 362 million barrels last month, 20% higher than a year ago, according to the Energy Information Administration. U.S. gasoline demand rose 0.4% the past four weeks vs. a year ago, thirstier than the 0.7% decline the first four months of 2009 but less than a typical 2% jump.