Oil prices shot above $80 a barrel Monday as a weakened U.S. dollar created more turbulence in energy markets than a storm heading into the Gulf of Mexico.
Ida had helped push crude prices higher all morning. Normally, the storm's demotion from hurricane to a tropical storm would depress crude prices. But the dollar is the real driver of energy markets at the moment. So, when the euro pushed passed the $1.50 level for the first time this month, oil prices rose even further.
Investors holding euros or other strong currencies can buy more dollar-based crude when the U.S. currency falls, and that has sent prices higher throughout the year.
Demand for oil is still weak, but investment in crude futures has paid off this year. A barrel of oil cost $32 in December.
Benchmark crude for December delivery on Monday rose $2 to settle at $79.43 a barrel on the New York Mercantile Exchange. A barrel passed $80 by early afternoon before easing back.
Meanwhile, the Energy Information Administration in its weekly update released Monday afternoon put the national average price for a gallon of unleaded regular at $2.666, down 2.8 cents from the previous week and the first decline after five straight weekly increases. The biggest drop was in the Midwest, where pump prices fell almost 6 cents.
For most of the year, drivers paid less at the pump than they did in 2008. But with oil prices rising this fall compared with last year's dramatic plunge, a gallon of gas is now 44 cents higher on average than it was a year ago.
The U.S. National Hurricane Center said Ida was expected to weaken further before making landfall along the Gulf Coast sometime Monday night or early Tuesday. Rain was already falling in many spots by Monday afternoon.
Weather Insight LP is expecting 700,000 barrels per day of crude oil production to be shut in, and 3 billion cubic feet per day of natural gas production to be taken off line until about Wednesday.
In other Nymex trading, heating oil rose 5.9 cents to settle at $2.0627 a gallon. Gasoline for December delivery gained 5.75 cents to settle at $1.9818 a gallon. Natural gas for December delivery rose 7.5 cents to $4.67 per 1,000 cubic feet.
In London, Brent crude for December delivery rose $1.90 to settle at $77.77 on the ICE Futures exchange.
Associated Press Writers Alex Kennedy in Singapore, Pablo Gorondi in Budapest, Hungary, and Becky Bohrer in New Orleans contributed to this report.