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Average U.S. pump prices have fallen 26 cents a gallon since mid-September to an average of $1.27, the lowest level since early January 2000. The Department of Energy (DOE) says national prices could fall a nickel or so more to catch up to lower wholesale prices.
In areas with lower taxes, such as South Carolina and Georgia, some dealers are selling regular unleaded gasoline at less than $1 a gallon. In the Midwest, site of the worst summertime price spikes, gasoline prices have fallen 45 cents to an average of $1.18 a gallon. However, prices are five to 10 cents a gallon higher in cities where lower-emissions gasoline is required.
Gasoline demand fell 10% for two weeks after the Sept. 11 terrorist attacks, but it since has rebounded to pre-attack levels, according to the Wall Street Journal.
Already, despite the ailing economy, gasoline demand is up 1.7 percent to 8.6 million barrels a day for the past four weeks compared with the year-earlier period, according to the DOE's Energy Information Administration (EIA). However, last year, when gasoline prices shot up by 35 percent consumers eased back on the pedal and gasoline consumption slowed, the report said.
Most of the drop in gasoline prices can be explained by lower crude-oil prices, which are holding at about $22 a barrel for the U.S. benchmark. A global economic downturn has dragged down demand for crude oil, and many analysts are predicting soft demand and low prices for at least the next six months. Analysts say part of the reason for stubbornly strong autumn demand is the high number of suburbanites driving sport-utility vehicles, which have contributed to lower average fuel efficiency.
If more Americans hit the highways, gasoline still is expected to remain cheap for a while, the report said. Supplies are more than 5 percent higher than last year. Dave Costello, an economist with the Energy Information Administration, predicts prices could stay this low through the spring, "assuming there are no disruptions" with refineries or oil supplies.
Heating oil prices are likely to be lower this winter as well. Refiners have been able to make more heating oil and diesel by shifting jet fuel production. The air-travel slowdown has cut jet-fuel demand by 10 percent compared with last year. Retail heating oil averaged $1.23 a gallon in October, down 17 percent from $1.49 in October 2000.