Fuel prices across the nation hit record highs yesterday, and some analysts say they may not back off significantly until after Labor Day.

In Hawai'i, the average price for a gallon of regular gasoline was $3.346. Most states had average prices that were more than $3 a gallon, and the national average was $3.073, according to AAA and the Oil Price Information Service.

The national average is higher than at any time — including the peaks reached after Hurricane Katrina damaged oil production, refining and transmission facilities. However, after adjusting for inflation, the March 1981 price was $3.223 a gallon, the Energy Department said.

Restricted refining capacity and strong demand appear to be key factors in rising prices.

"I think it's clogged at the refineries. We have enough oil, but we haven't built refineries in decades," said Lihu'e resident Jeanne Childs.

'OUTRIGHT SHORTAGE'

Oil professional Bill Green, former owner of Kahala Shell on O'ahu, said the Hawai'i market is tied in prices to California, where government regulation has prevented new refinery development. But one of the frightening things for Hawai'i is that California's gas prices are even higher than Hawai'i's right now — suggesting that there could be new highs in store for the Islands.

The AAA and oil price service listed California's average price at $3.483 yesterday.

"It's just an outright shortage of product in the refined market," Green said.

The nationwide average price at the pump yesterday was up 24 cents from a month ago and 17 cents higher than this time last year, according to the AAA.

While production has been hurt by refinery shutdowns, it has been rising during the past month, and some believe that could lead prices to stop rising sometime soon.

"They'll level off and probably decline in June," said Bill O'Grady, assistant director of market analysis at A.G. Edwards in St. Louis. But O'Grady warns that prices won't drop "precipitously" and will likely come back a bit before Labor Day.

Oil price service analyst Tom Kloza says threats of damaging hurricanes, which led to refinery and pipeline closings in 2005, will prop up prices later this summer. "We are near the top of the first 2007 hump," he said.

"Unfortunately, we will probably see only minor relief in late May, June or early July before ... the second summit."

SLOW SALES

While rising gasoline prices are a nuisance for those with higher incomes, they can lead consumers at the lower end to reduce spending in other parts of the economy.

Retailers such as Wal-Mart partly blamed rising gasoline prices for slow sales in April. Retail sales fell 0.2 percent following a 1 percent gain in March, according to the government. Poor weather and an early Easter also were to blame, says Michael Niemira, economist at the International Council of Shopping Centers.

Moody's www.Economy.com warned clients that "weak spending growth is expected to be the norm this year," and that energy prices will hold down growth for at least the next several months.