Gasoline falls below pre-storm price level

After two months, gasoline prices have settled below pre-Hurricane Katrina levels, and they may have room to drop some more in coming weeks, industry analysts said yesterday.

Average US gasoline prices fell another 12.3 cents per gallon last week to $2.48, according to new data reported by the US Energy Information Administration late yesterday. In New England, prices are down to $2.45 per gallon, which is the lowest weekly price since mid-August and a 77-cent drop from the post-Katrina peak in early September, the agency said.

''We've had a disruption to the market from the hurricane damage, but I am fairly impressed with how effectively we've managed to respond to it," said Sarah Emerson, managing director of Energy Security Analysis Institute, a Wakefield consulting firm. ''Prices will come down some more, but it's always hard to make that prediction because of what can happen in the crude oil market."

Investors are betting prices have farther to fall still. In trading on the New York Mercantile Exchange yesterday, gasoline hit its lowest wholesale trading price since June 8. Gasoline for delivery this month fell 6 percent, or 9.8 cents, to $1.53 a gallon, and contracts for delivery next month also fell 4.5 percent.

Crude oil, which represents about half the retail price of gasoline, fell by 2.4 percent to $59.76 in Nymex trading, a drop of 16 percent from its late-August peak and the lowest closing price since July 27. Oil prices fell 9.8 percent during October, but remain 15 percent higher than a year ago.

Emerson said a combination of factors helps explain the steady drop in gasoline price, including increased US imports of gasoline, releases of oil from the US Strategic Petroleum Reserve in Louisiana, higher output from refineries outside the Gulf region, and indications that Americans are responding to sky-high prices by driving less.

About three-quarters of the refining capacity shut down by Hurricanes Katrina and Rita along the Gulf Coast has come back online, according to the government's Minerals Management Service. As of yesterday, less than 1 million barrels per day of refining capacity there was still shut down, about 6 percent of total US capacity.

''There's still a lot of day-to-day volatility in petroleum prices, but a good deal of the refining capacity has returned to operation, and demand for gas has been relatively soft compared to the summer driving season," said Art Kinsman, a spokesman for the American Automobile Association's southern New England chapter. ''All of those things have led to prices tumbling. Beyond Thanksgiving, we'll just have to see what events transpire," Kinsman added.

Locally, he noted, prices remain about 40 to 60 cents a gallon higher than they were a year ago. Gasoline purchases represented nearly 4 percent of all US consumer spending in September, nearly double their early 2002 levels, according to the Commerce Department. The last time Americans had to earmark so much of their spending for gasoline was in 1984.

Another indication of softening demand, which could keep downward pressure on prices globally, came from the Organization of Petroleum Exporting Countries, members of which provided nearly 40 percent of the world's oil and heavily influence prices. In early October, for the first time since 1990-91 when oil markets were roiled by Iraq's invasion of Kuwait, OPEC agreed to virtually suspend its production quotas through the end of the year.

But acting OPEC Secretary General Adnan Shihab-Eldin told reporters at an OPEC meeting in Italy yesterday: ''There have been no requests from clients to indicate that they need this additional spare capacity."

Peter J. Howe can be reached at howe@globe.com. Material from Globe wire services was used in this report.