NEW YORK - Oil prices fell yesterday, as the dollar rose against the euro, and the Energy Department slashed its oil-consumption projections.
Still, the average nationwide gasoline price rose two cents to a record $4.04 a gallon. The pump price rose in the Philadelphia area as well.
Also yesterday, Senate Republicans blocked a proposal to tax the windfall profits of the largest oil companies, despite pleas by Democrats to use the measure to address America's anger over $4-a-gallon gasoline.
The bill would have imposed a 25 percent tax on profits over what would be determined "reasonable" when compared with profits several years ago. The oil companies would avoid the tax if they invested the excess profits in alternative-energy projects or in refinery expansion.
The dollar rose on recent supportive comments by U.S. officials, prompting selling by investors who had bought commodities such as oil as a hedge against inflation.
The Energy Department, in its monthly report, indicated that high prices were cutting oil consumption more than expected in the industrialized world. Consumption is now expected to fall 240,000 barrels a day in 2008; last month, the department forecast consumption would be unchanged from 2007 levels.
That report calmed a market that early yesterday shot up more than $3 on a projection by the International Energy Agency that said global demand would continue to rise, especially in China.
Light, sweet crude for July delivery fell $3.04 to settle at $131.31 a barrel on the New York Mercantile Exchange.
In Philadelphia and its four suburban counties in Pennsylvania, yesterday's average price for regular-grade gasoline rose two cents from Monday, to $4.11 a gallon, AAA Mid-Atlantic said. In the three suburban counties in South Jersey, the average yesterday rose a penny, to $3.97 a gallon.
A weekly report from MasterCard Inc. offered evidence that high prices were cutting gasoline consumption: MasterCard's SpendingPulse survey found that demand for gasoline fell 3.8 percent last week compared with the same week last year, and is off 5.2 percent, on average, over the last four weeks, compared with the same period of 2007.
Reports that Saudi Arabia has increased oil output by 500,000 barrels a day this quarter, 200,000 barrels a day more than previously thought, added some momentum to yesterday's drop in the price of crude.
Still, analysts said the Saudi move was only a peripheral factor.
"A couple hundred thousand barrels just isn't enough," said Jim Ritterbusch, president of energy consultancy Ritterbusch & Associates in Galena, Ill. "The main item here today is the dollar strengthening."