Gasoline prices drop in California, nationwide

Gasoline prices dropped nearly 10 cents in the state in the last week — the biggest one-week drop in California since December 2008, according to the U.S. Energy Department.

The fall in prices should accelerate in spite of the fact that the Memorial Day weekend is usually one of the biggest periods of the year for fuel demand, analysts said.

The average cost of a gallon of self-serve regular gasoline in California fell 9.7 cents to $4.121 since last week, according to the Energy Department’s weekly telephone survey of service stations. It was the largest drop since a decline of 15 cents the week of December 8, 2008, when the California average fell to $1.805 a gallon.

Discount gasoline chains led the charge in price reductions. At Costco, Sam’s Club and Food 4 Less stations in some many parts of Southern California, a gallon of regular gasoline could be bought for as little as about $3.85.

Nationally, the average fell 11.1 cents to $3.849 for a gallon of regular fuel. It was the biggest fall since prices sank 11.2 cents to a national average of $1.699 during the same week of December 2008.

Analyst Tom Kloza of the Oil Price Information Service said the decline in prices reaffirmed his prediction from earlier this month that nationwide, gasoline would soon cost an average of $3.50 to $3.75 at the pump, except he now thinks it will be closer to the lower side of his forecast.

He added that the sharp drop should fuel concerns that the dramatic rise in prices that began last September was driven more by Wall Street speculation than by supply and demand. Gasoline supplies were ample through the recent price jump, he said.

“For those of us who have watched a long time, this was a combination of hysteria and euphoria for the speculators,� Kloza said. “You had the panic mentality of the crowd, who collectively acted like blockheads.�

California prices were already headed lower earlier this month, but prices nationally remained nearly flat, largely because of fears that the worst Mississippi River flooding in 70 years would shut down some of the U.S.’ largest refineries in the South. Actions taken by the Army Corps of Engineers to open spillways upriver of the refineries have been credited with preventing shut-downs.

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