Sinking gas prices may fall further
As oil edged closer to $60 a barrel in New York futures trading Monday, the Energy Department said that pump prices continued an unprecedented free fall from their all-time highs recorded this past summer.
The price of a gallon of self-serve regular gasoline fell a further 25.8 cents over the last week to a national average of $2.656, marking the first time all year that the price dropped below 2007 levels, according to the Energy Department’s weekly survey of filling stations. A year ago, the national average was $2.872 a gallon.
California remained the most expensive region for gasoline in the continental U.S. But its price change also was striking, down 22.5 cents, or 2.9 cents below the price a year earlier, to $3.13 a gallon. Barring a major refinery mishap, analysts said, California motorists should see the average drop below $3 by mid-month.
Since the record national average of $4.114 on July 7 and the California record of $4.588 reached June 16, prices have dropped by 35% and 32%, respectively.
The declines, analysts said, aren’t over yet.
“I think we definitely have another 15 cents to 20 cents to go,” said Fred Rozell, director of retail pricing for the Oil Price Information Service in New Jersey.
Every dollar drop in the price that Americans pay for gasoline amounts to $378 million saved a day, he said.
“We’re still seeing a lot of room for prices to continue to fall,” Rozell said.
Economists warned that savings at the gas pump alone probably wouldn’t jump-start consumer spending and give a boost to the U.S. economy.
Those lower fuel costs would have to trickle down to the prices consumers are paying for every other thing they buy, said Bruce Bullock, executive director of the Maguire Energy Institute at Southern Methodist University.
“Most of that money will go to debt reduction and to essentials,” Bullock said.
In the oil markets, not even rumors of another emergency meeting by the Organization of the Petroleum Exporting Countries and the threat of more cuts in production were enough to halt the slide in oil futures trading Monday.
“The market was unimpressed” by those rumors, said Phil Flynn, vice president and senior market analyst for Alaron Trading Co. in Chicago, adding that some of the producers might be too dependent on oil revenue to meet the recently announced production cuts of 1.5 million barrels a day at a time when their own economies were slowing.
Light, sweet crude for December delivery fell 93 cents to settle at $63.22 a barrel on the New York Mercantile Exchange after trading as low as $61.30 earlier in the day.
Oil was following a direction, but not one set by OPEC, said John Kilduff, senior vice president at MF Global in New York.
“Oil is taking its cues from the global economic outlook,” Kilduff said. “Sixty dollars a barrel looks precarious, and we could drop down in the $50s.”