Gas prices surge in new year

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.

Nationwide, the average gallon of gas is just under $2.71. Meanwhile in Nevada the average price per gallon is $2.81, up from $1.85 per gallon in January 2009. For a typical Nevada motorist using 50 gallons of gas a month, that translates to $140.35 in fuel, up from $92.30 from a year ago.

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.

The average price for gas in Nevada is still off from the June 2008 high of $4.27 per gallon. Fifty gallons per month at that rate equals $213.40.

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 that 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.

• Nevada Appeal reporter Brian Duggan contributed to this report.