Gasoline Price Drop May Only Be Temporary

WASHINGTON – For the second consecutive week, retail gasoline prices have dropped sharply, falling below $3 a gallon on average in regions hit hardest by Hurricane Katrina’s disruption of Gulf oil and gasoline supplies.

The Energy Information Administration said Monday that motorists paid on average $2.786 cents a gallon nationwide for regular grade last week, a decline of nearly 17 cents from the previous week.

Gasoline prices dropped 20 cents to 23 cents a gallon in the Midwest and East Coast markets, where prices had soared to well over $3 a gallon after the hurricane.

The EIA said the price of regular gasoline averaged $2.857 a gallon on the East Coast and $2.676 in the Midwest last week. Motorists in the East are still paying about $1 a gallon more for gasoline than they did the same time a year ago.

Katrina knocked out 10 Gulf Coast refineries and the two main pipelines carrying gasoline to East Coast markets. The pipelines are back in operation, as are all but four of the refineries.

The price drop at the pump may be short-lived, however.

The cost of crude oil for delivery in October jumped by $4.39 a barrel Monday to $67.39 on the New York Mercantile Exchange amid fears that a tropical storm near the Bahamas might strengthen and affect Gulf oil production facilities still recovering from Katrina.

Wholesale gasoline prices rose nearly 26 cents to $2.0427 a gallon, while heating oil surged more than 20 cents to just over $2 a gallon. Both had dropped last week.