Gas prices fall 18 cents for week; oil below $60 a barrel

— -- Enjoy it while it lasts. Gasoline prices fell another 17.6 cents the past week, with average prices in three states dipping below $2 a gallon.

But prices appear to be nearing a bottom, with both crude oil and wholesale gasoline prices showing signs of stabilizing, although on Tuesday, oil futures dipped below $60 a barrel.

"You'll probably see another 10-cent (drop), maybe another 15 cents" the next few weeks, then prices remaining at that level, says Fred Rozell, gas-price expert at Oil Price Information Service (OPIS).

The nationwide average price for a gallon of regular gasoline was $2.22 Monday, down 17.6 cents from last week and 43 cents the past two weeks, according to the Energy Information Administration's weekly survey. Pump prices haven't been so low since February 2007.

The West Coast had the highest prices, at $2.53 a gallon. Gas was cheapest in the Midwest, at $2.06.

Gas prices have now fallen $1.61 since Sept. 15 and $1.89 since setting a record at $4.11 on July 7. Since Friday, average prices have slipped below $2 to $1.97 in Ohio, $1.96 in Oklahoma and $1.93 in Missouri, according to AAA.

Meanwhile, diesel fuel prices sank 14.4 cents the past week to $2.94, creeping below $3 for the first time since September 2007, EIA says.

Both gasoline and crude oil have plummeted amid a global economic downturn that's stifling demand from consumers and businesses. Yet crude oil has traded between $60 and $70 a barrel in recent weeks, a sign that prices might not have much further to fall, Rozell says. DTN analyst Darin Newsom agreed, noting that wholesale gasoline prices also have stabilized at $1.30 to $1.40 a gallon.

But crude oil prices tumbled Tuesday as a slide in global stock markets refocused attention on the prospect of widespread recession, which is likely to cut deeply into oil demand in many economies.

Light, sweet crude for December delivery was down $1.95 to $60.46 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Earlier in the session, it fell as low as $59.32 before rebounding.

"The oil market is coming down into line with demand expectations," said Simon Wardell, oil analyst at Global Insight in London.

"There's more downside weakness here than upside strength. We are expecting prices to go lower before they go higher, with U.S. crude hitting $50 before its reaches $65 again."

Economists are gradually readjusting their expectations for oil demand in light of the accelerating slowdown in the United States and Europe and some say a contraction in worldwide oil demand is possible next year.

Many analysts are expecting a big drop in consumption in developed economies next year and most suggest a further rise in demand in developing economies just about offsets that fall. But some economists are now talking about a fall in overall global oil demand in 2009.

"If we start seeing that, we really are dealing with a major surplus in supply and oil prices will come under heavy pressure," Wardell said.

On Monday, oil prices closed 2% higher, recovering from a midsession fall to $59.10 a barrel, lowest in nearly 20 months. Oil has shed 60% of its value since hitting a record high $147 in July.

A sign a bottom might be near is OPEC's willingness to trim oil production to prop up prices. OPEC recently slashed output by 1.5 million barrels a day and hinted of further cuts.

Pump prices should hover in the $2 range for several months, falling as low as $1.75 in some markets, says Tom Kloza, chief oil analyst for OPIS. But don't expect a sustained period of low prices reminiscent of the 1990s, he says. Although demand is weak, it's expected to pick up during next summer's driving season, and oil supplies are likely to remain tight for years.

Kloza expects gasoline prices to jump about 75 cents in spring 2009, though he's not predicting a return to $4 soon. "I wouldn't be surprised to see a lot of prices north of $3" in six months, he says.