NEW YORK (AP) -- Oil prices rose sharply Tuesday, once again approaching $100 a barrel as futures drew strength from a declining dollar, news of refinery problems and speculation that the Federal Reserve will again cut interest rates next month.

Gasoline prices, meanwhile, extended their decline at the pump.

Oil futures, which offer a hedge against a weak dollar, picked up momentum as the dollar fell to a new low against the euro, and added to their gains after the Fed forecast slowing growth and tame inflation next year.

Light, sweet crude for January delivery surged $3.21 to settle at $98.03 a barrel on the New York Mercantile Exchange after rising as high as $98.30 earlier.

Gas fell 0.5 cent overnight, retreating further from their most recent spike above $3. At a national average of $3.09 a gallon, according to AAA and the Oil Price Information Service, gas prices have fallen 2.2 cents in a little less than a week. Last week, many analysts predicted prices would instead rise another 10 to 15 cents a gallon to catch up with surging oil prices.

"More than likely, [prices will] probably hold steady through the end of the year," said Fred Rozell, retail pricing director at the Oil Price Information Service. "But that doesn't mean you're going to see relief in terms of lower prices."

Because gas prices are closely tied to the price of crude, pump prices could start rising again if crude does reach $100 a barrel, or higher. Oil peaked two weeks ago at $98.62 a barrel before pulling back to the low to mid $90s.