Gasoline prices slide again

NEW YORK -- Consumers got another break at the gasoline pump Monday, as prices dropped further below $3 a gallon and approached year-ago levels even as the near-certainty of an OPEC production cut pushed oil prices marginally higher.

Gasoline has fallen more than a dime a gallon since Friday, hitting a national average of $2.92 on Monday, according to auto club AAA, the Oil Price Information Service and Wright Express.

The going rate for a gallon of fuel in Las Vegas was $3.13 Monday, down from $3.16 on Sunday and $3.56 a year ago. The local average hit a record of $4.27 a gallon on June 21.

Pump prices have fallen 29 percent from their July record high of $4.11 a gallon and are only 10 cents higher than a year ago. That difference could be bridged this week if gasoline keeps falling at the current rate.

The pullback at the pump comes amid a dramatic turnaround in crude oil prices.

Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said Sunday that members plan to announce a "substantial" output cut at an extraordinary meeting that begins Friday in Vienna, Austria.

Analysts say OPEC countries have been alarmed by falling oil prices and want a production cut to prop up members' national budgets that only months ago were bulging with hundreds of billions in petrodollars.

Observers said it's tough to predict how OPEC's production cut might affect local gasoline prices.

Joe Sparano, president of the Western States Petroleum Association, said OPEC's members produce more than a third of the world's oil supply, so any cartel cutbacks on crude output could influence oil prices.

And Michael Geeser, a spokesman for AAA, said a decline in OPEC production could force up oil prices slightly. That could make gasoline pricier, because crude oil makes up about half of a each gallon of fuel.

Still, Geeser added, an ailing economy and slackened demand for gasoline could cancel out the effects of any OPEC production cuts.

"The economic and credit crisis might be so bad that even if supply is cut, demand will continue to drop off," Geeser said. "Usually, when supply is cut, that forces prices back up. But if demand is down, production cuts could have little impact on prices."

Demand fell substantially in the first nine months of 2008, with fuel use off 2.6 percent in California through September when compared with the same period in 2007, Sparano said. Possible factors behind the decline: high fuel prices, which changed driving habits; improvements in cars' mileage efficiency; and rising levels of ridership on mass-transit systems.

"We haven't read or seen anything that says people are rushing back into their cars and driving more" because of lower gasoline prices, Sparano said.

Geeser agreed that demand for fuel hasn't bounced back despite cheaper gasoline.

Consumers felt so much summertime pain at the pump that they're loath to relinquish their newfound conservation habits, Geeser said.

Drivers also remain angry about fuel prices, which they think should have retrenched even more considering how much oil prices have fallen.

"It's not like consumers are jumping up and down because of lower prices," Geeser said. "There's still an outrage factor going on, which I think is going to keep people in line with practicing those behaviors they practiced when gasoline topped $4 a gallon."

AAA doesn't predict gasoline prices, but Geeser said he believes fuel prices will likely fall a little further through the end of the year.

Sparano won't forecast fuel costs either, but he said drops in demand and crude prices have historically meant lower gasoline prices.

Khelil, who is also Algeria's energy minister, said OPEC may cut output again at a meeting in December, and that the group considers the oil market oversupplied by about 2 million barrels a day.

Light, sweet crude for November delivery rose $2.40 to settle at $74.25 a barrel on the New York Mercantile Exchange. The contract Friday gained $1.53 to settle at $71.38; crude has fallen about 50 percent from its July 11 high of $147.27.

Venezuelan President Hugo Chavez said Sunday he would like prices between $80 and $90 a barrel.

On Monday, trader and analyst Stephen Schork called those comments "oddly conciliatory."

"Unfortunately for Venezuela ... and the rest of OPEC, $80 might not be enough for the bears ... at least in the short run," Schork said in his daily publication, The Schork Report. "After all, the people ... who (initially) denied the existence of the bubble and who have subsequently been telling us since $110 that the floor in oil is in ... are the same people who are now telling us oil cannot last below $80."

Americans radically changed their behavior after gasoline prices spiked above $4 over the summer. And there are signs that emerging economies like China have begun to slow.

Analysts say almost any OPEC action has already been priced in by investors.

"The market is factoring in a big cut. It will likely be as much as 2 million barrels," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. "I think they will go pretty large just to change the sentiment."

Investors largely ignored an OPEC output reduction of about 520,000 barrels a day last month, focusing instead on weakening demand.

Vienna's JBC Energy suggested that, beyond an OPEC cut of at least 1 million barrels a day, a surprise in the form of Russia also reducing output in coordination with the Organization of the Petroleum Exporting Countries, may be ahead.

"The likelihood of such a move should not be underestimated, as Moscow has recently been seen putting more emphasis on its relationship with OPEC, having sent Vice Premier (Igor) Sechin to attend the last meeting in September," it said in a research note.

In Paris, Nobuo Tanaka, the head of the International Energy Agency, urged OPEC not to cut production so as not to stifle the still-growing economies of countries like China, India and Brazil.

"We think that the current level of prices are still very, very high and the market very tight," he said.

In its monthly report last week, the Paris-based energy watchdog cut its forecast for oil demand this year by 240,000 barrels per day, and slashed its 2009 forecast by 440,000 barrels per day amid the global financial crisis.

Review-Journal writer Jennifer Robison contributed to this report.