Pump prices fell sharply again over the last week to less than $3 a gallon in much of the nation, the Energy Department said Monday, as economic malaise and weak driver demand exerted more pressure on the cost of gasoline.
Analysts predicted that the long ride down from the record highs of late spring and early summer soon would take gas prices below 2007 levels for the first time this year.
Crude oil futures Monday managed only a modest rise despite the expectation that the Organization of the Petroleum Exporting Countries would announce a supply cut later this week in a bid to stabilize prices.
The average retail price of a gallon of self-serve regular gasoline plunged 23.7 cents to $2.914 a gallon as every region east of the Rocky Mountains dropped below $3, according to the Energy Department's weekly survey of service stations.
The most expensive gasoline was found in California, where the average fell 11.5 cents to $3.355. The U.S. average was just 9 cents above the year-earlier price nationwide; the California average was 21 cents higher than a year earlier. A separate survey by AAA listed average prices below $3 in 36 states and showed Alaska's and Hawaii's average prices as outpacing California's.
The gasoline price drops may not have seemed nearly as precipitous as oil's dramatic crash in the last four months to less than $70 a barrel last week from an all-time high above $147 a barrel, but analysts said the slow decline reflected the way gasoline sellers typically react to sharp swings in oil prices.
Fred Rozell, director of retail pricing for the Oil Price Information Service, said retail gasoline didn't come close to matching the 110% jump in crude oil futures between August 2007 and July of this year, managing a nearly 50% increase. That was part of what has made 2008 a bad year for refineries and gas station owners, Rozell said, as neither was able to raise prices quickly enough to keep pace with oil.
"Now that the price of crude is going down, retailers are not going to lower those gasoline prices very quickly," Rozell said.
California presents a special case. Rozell said its gasoline is among the most heavily taxed in the nation. California also uses the nation's cleanest and therefore most expensive blend, which is produced by few refineries outside the state.
"Every other state can pretty much get their gasoline from anywhere," Rozell said. Temporarily losing any of the California-grade gasoline refineries to an accident leaves the state more vulnerable to price increases.
