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AAA: Gas prices continue dip

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Gas prices across the country continued to decline, an upside of recent domestic and international economic worries, sending the national average price below the $3.50 per gallon mark for the first time in seven months. The national average for regular grade gasoline dropped to $3.45 Friday, down 9 cents in the past week and down 17 cents in the past month.  Prices remain 76 cents higher than year ago prices, yet 66 cents below the all-time high of $4.11 per gallon set in July 2008.

Crude oil rebounded somewhat early this week, following last week’s dramatic declines.  Contributing to the commodity’s slight upswing this week – U.S. weekly jobless benefits claims fell to a five-month low, a weakened U.S. dollar and German lawmakers approved a euro zone bailout fund.  However, crude oil could not sustain its upward momentum and slumped more than 3 percent on Friday following weak economic indicators fromChina, ongoing concerns about Europe’s debt problems and a stronger dollar.  Crude oil prices have dropped sharply this quarter on fears of aU.S. recession and concern thatEurope’s debt crisis will spread and damage the global economy further, ultimately hindering demand growth. U.S. crude has fallen nearly 14 percent this quarter, the sharpest drop since the last quarter of 2008.  Crude oil closed the week at $79.20.

In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stocks rose 1.9 million barrels, to 341 million barrels.  Gasoline stocks rose 800,000 barrels to 214.9 million barrels.  The EIA also reported revised data showingU.S. oil demand in July fell by 4% from a year earlier to 18.555 million barrels a day and was the lowest level for the month since 1996.  The drop came as gasoline demand fell 3.7% to 8.96 million barrels a day, the lowest level since 2000.  Revised total demand for July, typically the peak month of the summer driving season, was 2.3 percent below the earlier estimate, with demand for gasoline, the most widely used petroleum product, 1.3 percent lower than preliminary data showed.

“Not since March of this year have we seen the national average gas price below $3.50 per gallon,” said Windy VanCuren, Public Affairs Specialist for AAA Mid-Atlantic.  “Now that crude oil has settled in the $80 range, down from a three-year high this spring ($113.93 on April 29), gas prices are shifting downward as well, bringing much needed relief for cash-strapped motorists. American consumers are spending about $1.3 billion a day on their fuel purchases. Back on May 5 when retail gasoline prices peaked at 3.98 per gallon, we were forking over $1.51 billion a day.  That’s a drop of $200 million per day, but it is still nearly $400 million more per day than we were backing on January 3, when pump prices were at their lowest price of the year – averaging $3.07 a gallon.” Analysts believe the recent drop in prices will likely last through the fall, but caution that what we see now won’t be the ‘new normal,’ but rather a starting point for winter and spring prices.”

How much lower will gas prices go?  Some analysts believe the national average price could flirt with $3.00 per gallon by the end of this quarter, however, they caution that gas prices will likely rebound in early 2012.  Although prices have declined in the past month, they aren’t exactly low.  Gas prices are up 28 percent from a year ago and estimates showU.S. motorists are spending about $1.3 billion every day at the pump, putting the country in track to spend almost $490 billion on gas this year – the most in history.

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