Average gas price jumps to $1.74 a gallon

The average price U.S. drivers pay for gasoline jumped to the third highest on record over the last week, increasing 2.1 cents to $1.738 a gallon, the government said on Monday.

The average nationwide cost for regular unleaded gasoline is less than a penny away from the record $1.747 reached last Aug. 25, according to the Energy Information Administration.

The weekly survey of roughly 800 service stations by the Energy Department’s analytical arm showed that the latest price is also 2.6 cents a gallon higher from a year ago.

Guy Caruso, who heads the EIA, has said he expects the average price to set a new record at some point this month once the recent rise in wholesale costs are fully passed on to consumers.

Drivers in California are suffering the most, with gasoline prices way above $2 a gallon for the last three weeks. However, pump costs declined slightly over the last week in Los Angeles and San Francisco.

Some members of Congress have asked the Federal Trade Commission to investigate whether big oil companies are trying to manipulate markets and push up prices.

Gasoline prices could become an issue in this year’s presidential campaign, as rising costs reduce the spending power of consumers and boost expenses for businesses. Retailers like McDonald’s Corp, which depend on hungry motorists to drive their business, are watching closely.

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“The issue for us is if people end up driving around less because the cost of gas is high,” McDonald’s Corp. Chief Financial Officer Matthew Paull told an investor conference on Monday. “We’ve seen no effect so far.”

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Prices are up nationwide because of strong demand, lower inventories and high crude oil costs -- which account for almost half the price of gasoline.

Caruso said U.S. gasoline consumption is much stronger than normal for this time of year, and OPEC could help by not implementing a planned April 1. cut in its oil production. The cartel meets at the end of the month.

Citing high gasoline prices, Democratic Rep. Edward Markey of Massachusetts last Friday urged the Bush administration to demand that OPEC immediately increase production.

Although U.S. retail gasoline prices have marched higher in recent months, they are still significantly lower than in many other industrialized nations.