AP Oil analyst Tom Kloza said he expects to see retail prices below
$2 a gallon in some markets by the end of this year.


Gas Prices Plummet Amid Falling Demand
(AP)
NEW YORK (Oct. 23) - The average retail price of a gallon of gasoline
in the United States plunged more than 25 cents in the past two weeks,
as refining capacity was restored and demand slowed, a survey showed
Sunday.

Still, prices remained slightly higher than pre-Hurricane Katrina
levels.

The national average for self-serve, regular unleaded gasoline was
$2.6587 a gallon on Oct. 21, down about 25.3 cents per gallon from Oct.
7, according to the nationwide Lundberg survey of about 6,000 gas
stations.

"This is the biggest drop in a two week period that we have ever seen
in our many decades surveying the gasoline market, survey editor Trilby
Lundberg said.

Supply is up due to restoration of refining capacity, which was damaged
during Hurricanes Katrina and Rita, Lundberg said.

Demand was dampened as consumers cut back on gasoline consumption in
response to skyrocketing prices, as well as by evacuations of areas
such as the Gulf Coast.

Of the areas surveyed, Honolulu had the highest average price at $3.03
a gallon for self-serve, regular unleaded gas on Oct. 21, while the
lowest average price was $2.20 a gallon in Tulsa, Oklahoma.

Preliminary data shows gasoline demand is 2 percent to 3 percent lower
than a year ago, Lundberg said.

The current U.S. average price for a gallon of gasoline is just 3 cents
above the pre-Katrina price, Lundberg said.

"It's been a real roller coaster since then," she said.

"The supply and demand were grossly out of balance and remain somewhat
out of balance in the gas market,'' Lundberg said. "But that balance is
normalizing as refining capacity is brought back up.''

Lundberg said she expected the cost-cutting to continue in the coming
weeks unless an extreme winter drives up heating oil demand and affects
the price of crude oil and its derivatives.

Lundberg said Hurricane Wilma, which is bearing down on Florida after
hitting Mexico, seems to be benign to gas supply, but not to gasoline
demand. "The evacuations do remove some demand."

10-23-05 15:55 EDT