Just seven days into the new year, pump prices have surged past 2009 highs as winter storms and a flood of speculative money send oil prices higher.

With the average gallon of gas is now a shade under $2.71, a typical
motorist using 50 gallons of fuel a month will pay about $135 a month
to fuel up. Last year at this time consumers were paying only about $85
per month.

There are early signs of a recovering economy and job figures due
Friday may further that trend, yet consumers have pared way back on
energy spending.

It’s not clear how much of an energy burden can be carried with unemployment hovering around 10 percent.

Americans are now spending about $1 billion a day on gasoline with most
paying 90 cents to a dollar or more per gallon than they did a year ago.

In less than a month, crude prices have jumped 20 percent and yesterday
peaked above last year’s high. That has dragged pump prices to new
15-month highs.

Gas prices in some coastal cities are already at or close to $3, and
many energy experts believe that most of the nation will follow along
this spring as refiners switch over to less polluting blends of gas as
required by law.

Yet that scenario is heavily dependent on the fiscal health of the
country in coming months, said Geoff Sundstrom of auto club AAA.

“With gasoline, much of that is going to depend on the ultimate
strength of the economy in the spring and higher demand seasonally for
fuel,” he said.

Demand for gasoline will come nowhere close to levels just two or three years ago, said Sundstrom.

Still, prices are rising fast; 7 cents in just the past week, according
to AAA, Wright Express and Oil Price Information Service.

The run-up in gasoline prices has had nothing to do with demand for
gasoline that is so weak that refiners have been shutting down
operations and scaling back others. The government said Wednesday that
refineries operated at just 79.9 percent capacity for the week ended
Friday, well below historical averages.

Valero Energy, the nation’s largest independent refiner, has posted
consecutive quarterly losses and expects a loss in the fourth quarter
as well.

Refiners are paying high prices for the crude that they turn into fuel,
but say demand for fuel is so low that they cannot recoup those costs
when they bring their products to the market.

“We have to see strongly increased demand, which we’re not seeing for both distillates and gasoline,” he said.

In fact, winter storms have driven gasoline demand down sharply because people have been unable to drive.

Snow was piled so high in Iowa that drivers couldn’t see across
intersections. North Dakota saw heavy snow. There were wind chills of
52 below zero in the Midwest Thursday. Temperatures plummeted in the
South, threatening fruit crops.

The Energy Information Administration reported Thursday that 153
billion cubic feet of natural gas was pulled from storage last week, in
line with estimates. But supplies remain well above average.

Benchmark crude for February delivery fell 43 cents to $82.75 a barrel
on the New York Mercantile Exchange as the dollar rebounded.

Money has flooded into oil futures because the dollar has been so weak,
making it cheaper for anyone holding stronger currencies to buy crude.

In other Nymex trading in February contracts, heating oil fell 1.7
cents to $2.1858 a gallon and gasoline dropped less than a penny to
$2.1334 a gallon. Natural gas futures fell 22.5 cents to $5.784 per
1,000 cubic feet.

In London, Brent crude for February delivery fell 26 cents to $81.63 a barrel on the ICE Futures exchange.

Source: Associated Press

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• Another winter blast helps boost oil price

    Heating oil prices got a boost Tuesday as the second powerful storm in four days threatened to dump more than a foot of snow on the East Coast.

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