Pump prices took a record-setting nose dive in the past week, the Energy Department said Tuesday, as oil costs and fuel consumption slumped while gasoline supplies returned to normal around much of the nation.
Analysts say that more price relief probably is on the way but not for the best of reasons: The stumbling U.S. economy is putting the brakes on fuel use.
Although Americans are spending less on average for gasoline than they have since late February, they also have less to spend because of damaged investment portfolios and higher prices for many other items. Add weak consumer confidence and experts don't expect motorists to start piling on mileage again.
"We will continue to see lower prices, but the sad thing is that this is like losing weight from a parasitic ailment,'' said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey. The declines were not enough for behavior modification, he added.
"People aren't going to decide to drive to the Grand Canyon or decide to go out and buy a three-ton vehicle instead of a two-ton because of this,'' Kloza said.
The U.S. average price for a gallon of self-serve regular gasoline hit $3.151 on Monday, down a record 33.3 cents, or 9.6 percent, from the previous Monday, according to the Energy Department's weekly survey of service stations. The survey results were released a day late because of the Columbus Day holiday.
Hurricanes figured prominently in the old and new gasoline decline records.
This season's hurricanes Gustav and Ike set off a surge as precautionary shutdowns of refineries and oil rigs reduced supplies and kicked prices briefly to $4.50 and higher in some parts of the Southeast.
The old one-week record came after Hurricane Katrina hit the Gulf Coast in 2005. Once some of the severely damaged Gulf petroleum facilities began to return to normal, the U.S. average fell 16.9 cents, or 5.7 percent, during the week of Sept. 19, 2005, said Doug McIntyre, a senior market analyst with the Energy Department's Energy Information Administration.
At the New York Mercantile Exchange on Monday, crude oil for November delivery declined $2.56 to $78.63 a barrel, and some analysts said it had farther to fall. Oil is down more than 40 percent from its peak in July above $147.
"I'm still bearish,'' said Phil Flynn, vice president and senior market analyst for the Alaron trading company in Chicago. "There are significant problems on the demand side. China and India and the Middle East are not going to see as much economic growth as people thought a few months ago. In the U.S., we've had a real shock to the system. We are not going to see a rapid rebound in oil demand.''
Fadel Gheit, senior energy analyst for Oppenheimer & Co., predicted that oil would land somewhere between $50 and $75 a barrel by early next year.
"No one is talking about $200 oil anymore,'' he said.