How Low Will Gas Prices Go?

This is one of those predictions I would love to see come true.

NEW YORK (CNNMoney) — The recent drop in prices at the pump could pick up steam, driving gasoline sharply lower in coming months.

“I’d say $2 to $2.50,” said Tom Kloza, chief oil analyst at the Oil Price Information Service. “Once you get past Sept. 15, it’s really a downhill game.”

Kloza said so far the average cost of a gallon of gas peaked this year at $3.036 on Aug. 10 and has come down largely thanks to diminishing hurricane fears.

“There’s just nothing happening in the tropics, and the market had priced in all sorts of calamities,” he said.

The motorist organization AAA reported a nationwide average of $2.82 Tuesday, the lowest since April 20.

Online gasoline price survey site shows Wednesday’s national average at $2.80.

Another analyst pointed to a 60-cent drop in wholesale and spot prices the past few weeks, noting consumers should see a similar drop in retail prices in the coming few weeks as the decline works its way through the market.

The drop in wholesale and spot prices would translate to retail gasoline prices of around $2.50 to $2.60 a gallon, analysts said.

“The levels that were in place were never justified to begin with,” said Mark Gilman, an analyst with The Benchmark Co. “This is a bit of a return to reality.”

Gilman said retail gasoline prices of around $2 a gallon by Thanksgiving were certainly possible, although not likely.

He said crude prices would need to drop by about $20 a barrel to have that effect, and he just didn’t see any major catalyst that would cause such a decline over the next three months.

Kloza said several circumstances are behind the recent gasoline price declines: the end of the summer driving season, which reduces consumer demand for gasoline, as well as the end of seasonal federal requirements on gas that make the cost of importing and refining it cheaper.

Update: I think high gas prices are one of the main reasons the President has not gotten credit for the wonderful economy. He didn’t really get any credit for it before gas prices started to rise either, though. Ed Driscoll points out the likely reason.

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