Start Saving: Steep Drop for Gas Prices

Sept. 13, 2006 — -- After a summer of paying $3 a gallon and more, consumers now watch with relief as prices head in the other direction.

In Oskaloosa, Iowa, today, the price for regular unleaded was $2.03 a gallon. In Fort Lee, N.J., the price hit $2.47 a gallon.

"I saved $20 today. If you think about it, in a month I could save $100," one driver told us.

One analyst who forecast the stunning rise in energy prices correctly this year, is now predicting more price cuts to come.

"We think that by the end of the month we're looking at gasoline prices at the pump around $2.25 to $2.50 a gallon," said Wachovia energy analyst Jason Schenker. "During the winter months, we could see the price go down to $2 a gallon nationally."

It's not unusual for prices to fall after Labor Day once summer road trips end and there is less demand for gasoline.

But it is unusual for prices to drop this dramatically. With prices down 42 cents in just three weeks, this ranks as the steepest drop in 10 years.

That decline follows a sharp drop in oil prices, and analysts credit that to a happy coincidence of events -- the hurricane season has been unusually mild; fears that Iran would use oil as a weapon have subsided; and the shutdown of Alaska's Prudhoe Bay oil field was not as severe a disruption as expected.

Add those factors to a slower-growing U.S. economy, and it's a nearly perfect recipe for falling gas prices at a very welcome time.

"We also might anticipate that people who've seen this money come out of their wallet into their gas tank … go back into their wallet and out at some retail stores," Schenker said.

Consumers we spoke to around the country today were already making plans to spend their new savings.

"I'm going to Blockbuster right now and rent a movie," one person told us in Atlanta.

While another responded with more frugal plans, saying, "What am I going to do with the $10? Save it up for when I have to get more gas next year when it's $5 a gallon."

When it comes to gas prices, what comes down in the fall is almost sure to go up again the following summer.