The price of oil rose to more than $108 US a barrel Thursday and retail gasoline prices headed higher at the same time.
Crude for April delivery closed up $1.55, at $107.83 per barrel, in New York but in electronic trading later rose above $108. And every futures contract to March 2013 closed above $108, with next August above $109.
Retail gasoline prices rose. Price-tracking website GasBuddy.com reported the price of regular gasoline on average in Canada was 1.25 a litre, up more than two-thirds of a cent from Wednesday.
Oil has been rising on concerns that Iran will try to cut off more oil supplies to Europe ahead of a planned EU oil embargo in August. Such a move would temporarily tighten supplies as refineries search for alternative sources of crude.
Iran was shipping about 18 per cent of its crude exports to Europe, but many countries there have already scaled back or stopped buying Iranian oil entirely.
Crude has jumped from $96 US a barrel earlier this month and $75 in October.
The Canadian dollar closed up 0.28 of a cent at 100.24 cents US, but analysts suggested that the loonie dollar was not finding much support from crude at these levels since they are getting to a point where economic growth could be at risk.
"And there in lies the Canadian predicament," said a commentary from RBC Capital Markets.
"High oil prices do indeed benefit Western Canadian producers of crude but for a cyclical economy such as Canada's, a supply shock-led price increase negatively impacts the broader fundamental backdrop to the country and (the Canadian dollar) through its impact on global, but particularly U.S., economic growth."
The issue of gasoline prices has fast become an election issue in the U.S., where the current average national price of $3.58 per gallon is the highest ever for this time of year.
A new Associated Press-GfK poll indicated that though President Barack Obama's approval rating on the economy has climbed, 58 per cent of those polled disapprove of what he's doing on gasoline prices.
Republicans have seized on the issue, citing Obama's decision to reject a permit for a pipeline proposed by Calgary-based TransCanada Corp as evidence of a misguided policy. The Keystone XL project would carry mostly oilsands crude to the U.S. Gulf coast.
In response, Obama said in Florida on Thursday that simply calling for more drilling is just a "bumper sticker," not a real plan for bringing down rising prices.
Obama said his administration's "all-of-the-above strategy," which includes oil, natural gas, wind and solar power, is the "only real solution" to the nation's energy challenges.
Confronting public anxiety over rising gas prices, Obama said the current spike is a "painful reminder" of why developing new energy is critical to the nation's future.
At the same time, natural gas fell after the U.S. government said supplies remain significantly higher than average levels for this time of year.
March natural gas futures closed down two cents, at $2.62 per 1,000 cubic feet, in New York.
A boom in North American shale drilling has filled underground storage facilities across the country. The Energy Information Administration says supplies are more than 40 per cent higher than the five-year average.
Major natural gas producers recently cut back on production, as prices linger around a 10-year low. But analysts say they're not doing enough to reduce the glut.
"There's still an avalanche of gas available right now," said Gene McGillian, a broker and oil analyst at Tradition Energy.
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