Gas Prices Drop Record 33 Cents In A Week

Oct. 14, 2008— -- Across the country, from the West Coast to the Midwest to New England, gas prices continue to plummet.

"Very glad to see them at $3," said Kansas driver Sandy Hickamn. "I didn't think I would see it again."

The price of a gallon of gasoline fell dramatically last week, down from its high of $4.11 a gallon just after the Fourth of July, to a nationwide average of $3.15 today, according to the Energy Information Administration.

The 33-cent price drop in the past week is the largest one-week fall on record. But what's the reason for the dramatic turnaround? Oil.

Oil prices have been falling too, down 46 percent from the record high of $147 a barrel this summer, because of lower consumption. Slowing economic growth means less demand for oil and gas overseas and at home. It's the flip side of global financial turmoil.

"To be able to save a little money at the pump is a saving grace!" said Hickman.

Drivers are noticing the difference at the pump and in their pocketbook.

"I actually saved $40 from last week!" exclaimed Texas driver Joseph Shiloh.

According to the American Automobile Association, if gas stayed at $4 a gallon, as it was earlier this year, the average family would pay $4,800 a year filling up.

As oil prices skyrocketed this summer, analyst after analyst predicted the worst; some said that prices could jump to $4.50 a gallon.

But consumers put the brakes on their driving. Demand fell and prices followed.

"Consumers have been stressed by high fuel prices, high food prices, and a loss in value of their 401(k)s. So they've had to change their habits, which has resulted in lower gasoline demand, and so we've seen worldwide prices have been falling," said Andy Lipow said, president of Lipow Oil Associates in Houston.

Today, many analysts see the barrel as half full.

"I expect gasoline prices to fall to $3 by Thanksgiving and they could fall even faster by the end of the year," Lipow predicted.

Soaring airline ticket prices are coming down, too. This week, many carriers slashed fuel surcharges.

A month ago, a round-trip ticket from San Francisco to London cost $409. Along with a $428 fuel surcharge and taxes, the ticket price peaked over $1,000.

Today, the fare is cheaper at $235 and the fuel surcharge has been cut, rounding out to big savings, according to Bestfare.com.

"With fuel costs coming down, the airlines now have more wiggle room to tempt us and to lure us to get on airplanes," said Tom Parsons, publisher of Bestfare.com. "We're seeing some aggressive airfares out there right now. I'm even in shock and awe that the airfares are that cheap."

Carnival Cruise lines plans to remove its fuel surcharge, too. But many other industries, from pizza delivery to trash pick-up, aren't budging, as they wait to see what gas prices might look like down the road.

Summer's high prices almost make people like Wayne Norlander forget that he's still paying much more a gallon than he was a year ago. Almost.

"You drive by a station and you say, 'Wow: $2.99 a gallon! How cheap is that!'" said the New Jersey driver. "Cheap? $2.99 is still expensive!"