Oil prices fell for a second day Tuesday as a global cold spell eased its grip and pulled crude back from a 15-month high.
Crude prices have jumped 20 per cent in the past month as the coldest weather in years took hold. The weather has boosted demand for heating oil in the U.S. Northeast, and natural gas almost everywhere.
Even in the U.S. South, where fruit crops were endangered by frigid temperatures, homeowners were reaching for the thermostat.
Duke Energy said Tuesday that its customers in the Carolinas set a record on Monday for power demand during the winter.
Yet the U.S. dollar has had more to do with rising energy prices than the cold.
Every time the dollar falls, more investors pile money into dollar-based crude trades. Investors can get more crude for less if they hold euros or other relatively strong currencies.
There are some indications that gasoline prices are close to a plateau for now, but spring is on the way and that usually means prices will be rising soon.
For the most part, 2009 was a real bargain for consumers as far as energy prices go. It's unlikely that consumers will get the same deals this year, though few expect prices to rocket back to levels seen in 2007.
The U.S. government said Tuesday that it expects retail gasoline prices to average $2.84 per gallon this year, an increase of 49 cents from 2009. The Energy Information Administration said prices are likely to pass $3 per gallon during the spring or summer, largely because of rising crude prices.
Those prices are rising even though the EIA said gasoline consumption was flat in 2009 compared with 2008 when the economy was in a tailspin.
There are already signs that the recent bout of cold is losing its power over energy prices. Most meteorologists see temperatures moderating for the rest of the month, though the cold snap along with the weak dollar did help push prices about 15 cents higher per gallon since mid-December on average.
Prices climbed 0.4 cents overnight to a national average of $2.751 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. That's about 96 cents more per gallon more than a year ago when drivers were still able to cash in on collapsing oil prices.
In Canada, the price of gas averaged C$1.019 per litre, up from 98.3 cents per litre a month ago, according to price-watching website GasBuddy.com.
Prices almost always head higher come spring as refiners switch to more expensive blends of gasoline to comply with federal environmental laws and more people hit the road.
Benchmark crude for February delivery fell US$1.73 to settle at $80.79 a barrel on the New York Mercantile Exchange. It's the first time this year a barrel has closed below $81.
In other Nymex trading in February contracts, heating oil fell 4.83 cents to settle at $2.1318 a gallon and gasoline slipped 4.49 cents to settle at $2.0978 a gallon. Natural gas futures rose 13.7 cents to settle at $5.591 per 1,000 cubic feet.
In London, Brent crude for February delivery fell $1.67 to settle at $79.30 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.