Gas prices could fall below $3 a gallon by Halloween as oil prices on Wednesday fell to their lowest point this year on fears of a global economic downturn.
"You could say it's a good thing," said Tom Kloza, chief oil analyst for Oil Price Information Service. "But it's happening for all the wrong reasons."
This week, the price of a gallon of gas across the United States fell below $3.50 for the first time in nearly six months, as oil prices remained lower and refineries recovered from hurricanes Ike and Gustav.
"Hopefully it's not just another short-term market fluctuation," said Lauren Bassett as she filled up her Toyota pickup Wednesday afternoon in Tampa. "Hopefully, it's something that will be a little more long lasting."
The 27-year-old Tampa pharmacist traded in a more fuel-efficient car for a truck to tow her boat just as gas prices started skyrocketing. It would be nice to see a fillup cost less than $60 again, she said. If gas hits $3 a gallon, "I'd be ecstatic." Just in case it doesn't, she's checking out motorcycles.
Oil prices have fallen nearly 40 percent since hitting a peak of $147.27 a barrel on July 11. Meanwhile, gas prices in the Tampa Bay area have fallen nearly 13 percent since the July 16 peak of nearly $4.01 a gallon — it now averages $3.50 a gallon. Light, sweet crude for November delivery fell $1.11 to settle at $88.95 on the New York Mercantile Exchange. Oil at one point fell to $86.05 — the lowest price since Dec. 6, 2007.
The fall in gas prices is expected to accelerate if oil prices remain low, said Jonathan Cogan, an analyst with the Energy Information Administration, the statistical arm of the U.S. Department of Energy. Gas prices haven't fallen as far or as fast as oil for two reasons, he explained.
First, gas prices didn't rise as far or as fast as oil prices surged, Cogan said. Second, the one-two punch of hurricanes Gustav and Ike led to a prolonged shutdown of several refineries. At one point, more than 20 percent of the nation's refining capacity had been knocked out, Cogan said. Gasoline inventories in late September fell to their lowest levels since 1967.
All but two refineries were back up by Monday, according to the Department of Energy.
Gasoline supplies are now returning to normal, and the fall in gas prices could accelerate if oil prices don't turn back up, Kloza said.
"The bottom line is that you're going to see very, very sharp price drops this month," Kloza said.
It's not all good news, he pointed out. The value of home prices and stock portfolios have dropped sharply, too.
Information from the Associated Press was used in this report. Asjylyn Loder can be reached at firstname.lastname@example.org or (813) 225-3117.