Gasoline Prices Tumble

CAMARILLO, Calif. -- Gasoline prices fell an average of 3 cents a gallon nationwide during the past two weeks to their lowest level in nearly three years.

But retailers shouldn't expect the trend to last much longer.

Pump prices could bottom out as early as January, as retailers try to halt sliding profits, oil prices continue to rise, and the major oil producing nations implement an expected production cut, said Trilby Lundberg, an industry analyst.

Prices have fallen for the past 15 weeks, tumbling a total of 44.61 cents a gallon since Sept. 7, when the national average weighted price for all three grades was $1.56 a gallon. On Dec. 21 the average was $1.12, according to the Lundberg Survey.

The ongoing decline has amazed some analysts because the cost of crude oil has been rising steadily for the last five weeks. Normally gasoline and crude oil prices move in tandem.

A number of factors beyond the price of crude are currently in play. First, there's an unusual glut of gasoline on the market. Second, the weaker economy is forcing gas stations to compete more heavily for drivers' business. In many cases, station owners have cut their retail prices faster than their wholesale costs have come down, squeezing their own profit margins.

By January, supply levels will be closer to normal, and even though economic conditions aren't expected to improve much in the short term, retailers will be forced to raise their prices shortly if they expect to stay profitable, Lundberg said.
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