Gas Prices Take Another Dip

Sept. 11, 2006 — -- The Energy Department says the average price of a gallon of regular unleaded gasoline dropped $0.11 last week to $2.62, falling to its lowest price since April 3.

Since mid-August, prices at the pump have fallen $0.42 from a summer high of $3.04. That's a 14 percent slide in prices. Prices are 11 percent lower than the retail price a year ago ($2.96).

All this on a day when oil prices retreated about 1 percent, closing at $65.61 (down $0.64) a barrel in New York. That's the lowest level since late March and caps a 20 percent slide in crude oil prices since mid-July.

By any measure prices are near historic highs.

During the past 24 months, crude has averaged $66.35 -- $59.38 during the past two years. That's almost twice the average price of oil during the past decade ($32.04).

Prices at the pump have been equally high: $2.64 during the past year -- $2.36 during the past two years, compared with an average of $1.55 during the past decade.

Americans were getting used to paying more than $3 per gallon, so this feels like a real relief. If we could remember what we were paying just two years ago, the price at the pump would today seem quite high.

It could be called a coincidence of positivity.

Consider all this: We've seen the once dire hurricane forecast revised lower (thank you, Mother Nature), which is taking some of the scare out of the market. The BP pipeline problem hasn't been nearly as disruptive as was originally predicted. And Iran seems to be backing away from using oil exports as a pawn in its ploy to go nuclear.

All these things, combined with the regularly scheduled end to the summer driving season, are taking a lot of the "risk premium" out of the oil markets.

Another thing that's helping drive prices lower: slower economic growth. Remember, the Fed has been pushing rates higher to keep growth in check, and we've seen gross domestic product take a steep drop during the second quarter. Slower growth means a reduced demand for energy of all types.