Not since January 2005 have California drivers had it this good: The state's average retail price for gasoline tumbled 15.7 cents in the last week to puncture the $2-a-gallon barrier, the Energy Department said Monday.
But many motorists -- convinced that the economy was a mess and fuel costs could leap again with little warning -- were still clinging to behavior acquired when pump prices hit record highs during the summer.
In past years, Americans always returned to their old driving habits, even when prices settled higher than they had been before. But the last cost increase reached intolerably high levels of $4.11 a gallon nationally and nearly $4.60 a gallon in California, analysts said. That occurred as home values, retirement accounts and the stock market were crashing.
"The effects of these influences on income and wealth have overwhelmed the impact of these fuel price drops," said Energy Department economist Neil Gamson. "And gasoline demand will continue to fall. It will be lower in 2009 than it was this year."
In California, the nation's biggest fuel market, gasoline consumption was down 8.3% and diesel use was down 14.4% in August, the most recent month for which data were available, from year-earlier levels, the state Board of Equalization said Monday.
In addition to sluggish demand, falling oil prices, which are down more than 60% from the July peak above $145 a barrel, are contributing to lower gas prices.
Oil tanked Monday after a weekend in which the Organization of the Petroleum Exporting Countries looked anything but unified in deciding not to cut production, and the stock market plunged on word from the National Bureau of Economic Research that the nation was in the midst of its longest contraction in 26 years.
Light sweet crude for January delivery dropped $5.15 a barrel, or 9.5%, to close at $49.28.
The market didn't really believe that OPEC members would be able to agree on cutting more production, and the news that the nation was in a recession wasn't exactly a surprise, said John Kingston, global director of oil at Platts, which provides information on the energy and metals markets for clients in 150 countries.
"If you're looking for something bullish about oil, you'll be looking far and wide," Kingston said.
Lower gasoline prices felt relatively insignificant to many consumers, even in a week when the average price of a gallon of self-serve regular gasoline in California fell to $1.955 and the national average declined 8.1 cents to $1.811, the lowest in almost four years.
