Gas Under $3: How Low Can It Go?

Competing gasoline stations advertise gas at $3.199 and $3.323 per gallon in Oklahoma City, June 21, 2012.

Seems like only yesterday U.S. motorists feared summer gas prices hitting $5 a gallon. Yet right now in some markets the price of gas is falling. In St. Louis, for example, at some stations, it's $2.99. How much lower might it go?

Andrew Lipow, president of Lipow Oil Associates in Houston, says he expects to see the average price nationwide to fall to $3 a gallon by Halloween, "barring the Middle East imploding or exploding" or "a major hurricane impacting the Gulf coast."

In South Carolina and in Houston, he says, the price of gas already is below $3. "In South Carolina, I've even seen $2.73 at some stations."

What accounts for the decline?

The reasons, says Lipow, include a decline in oil prices, which have been falling for months. The supply of oil right now is abundant. Saudi rates of production, Lipow says, remain high. He expects them to remain high all summer. U.S. inventories are bigger now than at any time in the past 22 years.

The national gas price average for regular gas is $3.44, down nearly 10 cents from a week ago, according to the Department of Energy on Monday. This price is also down nearly 14 cents from a year ago.

An embargo on Iranian crude begins this weekend; but the market, says Lipow, "is discounting any significant supply disruption that might result."

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