Oil prices surged nearly $2 a barrel Thursday as the dollar fell against the euro and investors anticipated strong demand for diesel fuel in parts of China ravaged by Monday’s earthquake. Gas prices, meanwhile, advanced past $3.77 a gallon.

Light, sweet crude for June delivery rose $1.80 to $126.02 a barrel on the New York Mercantile Exchange.

The dollar’s long decline has been one of the driving forces behind oil’s record-setting climb. Many investors buy commodities such as oil as a hedge against inflation when the greenback falls; also, a weaker dollar makes oil less expensive to investors overseas.

Oil futures were also following heating oil prices higher. Heating oil is a middle distillate, closely related to diesel fuel, and is often traded as a proxy for diesel. Some investors are concerned that damage to China’s natural gas infrastructure will lead to a temporary spike in demand for diesel. Heating oil futures for June delivery rose 4.42 cents to $3.6620 on the Nymex.

At the pump, meanwhile, the national average price of a gallon of regular gas rose 1.8 cents overnight to a national average of $3.776, according to a survey of stations by AAA and the Oil Price Information Service.