Despite drop in demand from start of 2009, crude is now twice the price

Oil starts year above $81 a barrel

NEW YORK — Oil started the new year Monday trading above $81 a barrel, almost double what it fetched at the beginning of 2009 even though the U.S. is using much less.

Prices, which have been propped up by a weak dollar, will get even more support as winter weather chills the country. The U.S. may be using less crude, but China and other developing nations are using more to fuel their burgeoning manufacturing industries, and that can push prices higher in the U.S. as well.

Gasoline, heating oil and other fuels are already heading higher and may continue to do so as the market tests how much people are willing to pay for energy, analysts said.

A surprisingly strong manufacturing report Monday may hint at an improving employment picture in the U.S., but right now consumer demand remains weak because millions have lost jobs.

There is concern that energy costs are outpacing job recovery.

“It’s going to slow down the economic recovery in the U.S.,” said Andrew Lipow, president of Lipow Oil Associates in Houston. “And much of that extra money we’re spending will be headed back overseas since we still import two-thirds of our energy.”

The Labor Department releases its monthly employment report Friday and that could affect energy prices ahead.

Benchmark crude for February delivery climbed $2.01 to $81.37 a barrel on the New York Mercantile Exchange. The price reached as high as $81.68, nearing the $82 high for 2009 on the first day of trading this year.

Natural gas also jumped more than 5 percent, rising 28.4 cents to $5.856 per 1,000 cubic feet.

Pump prices continued to press higher, adding less than a penny overnight to bring the national average to $2.663, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 2.5 cents more expensive than last month and $1.005 more expensive than the same time last year.

Yet refiners say they are still losing money because the cost of buying oil at today’s prices does not cover the cost of turning it into fuel like gasoline. Demand for gasoline, while rising, remains relatively weak.

Oil refiners have shuttered some operations and are pulling back elsewhere. In the last week of December, U.S.-based refining slowed to the lowest level since 1990 when such data was first reported, according to government records.

“They’re losing money hand over fist,” said analyst Stephen Schork, adding that gasoline prices will catch up to soaring oil prices, or vice versa.

In other Nymex trading in February contracts, heating oil rose 6.84 cents to $2.184 a gallon and gasoline gained 5.26 cents at $2.1055 a gallon.

In London, Brent crude for February delivery rose $1.95 to $79.88 a barrel on the ICE Futures exchange.

Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore and Yuras Karmanau in Minsk, Belarus, contributed to this report.