Americans Skeptical About Gas Price Drop

The gasoline price board at an Arco gas station is shown in San Francisco, Monday, Sept. 25, 2006. Retail gas prices dropped nearly 24-cents a gallon in the past two weeks, continuing a decline from a mid-August peak. (AP Photo/Jeff Chiu) (Jeff Chiu - AP)

Jay Ricker, president of Ricker Oil Co. in Anderson, Ind., which owns about 30 gas stations and supplies fuel to 30 more, said he's thrilled to see pump prices sinking as fast as they are.

With prices falling, more customers are buying mid-grade and premium gasoline, Ricker said, and they're spending more cash inside his convenience stores, where profit margins are higher.

"I'd much rather sell them a donut or a fountain drink," said Ricker, whose stations are selling regular unleaded for a few pennies above $2.

Fimat USA oil analyst Antoine Halff said there is no doubt that "the downturn in prices is welcome news from an electoral standpoint for the ruling party." But he scoffed at the notion that the U.S. president had the power to muscle around a global market.

The plunge in prices, Halff said, is the result of growing domestic inventories of fuel, slowing economic growth and toned-down rhetoric between Iran and the United States, which has been critical of Tehran's uranium enrichment program.

The selloff has been magnified, Halff said, by the recent retreat from the market by many speculative investors who got burned by the late-summer volatility. Just last week, a prominent hedge fund told investors that it lost some $6 billion due to bad bets on natural gas prices.

That said, "the sky is not falling," said Halff, who believes oil prices will likely head higher again this winter and average more than $65 a barrel throughout 2007.

At the start of summer, oil analysts were worried about rising demand, the threat of hurricanes and the nuclear standoff between the West and Iran, OPEC's second-largest producer. As a result, crude-oil futures soared to more than $78 a barrel in mid-July.

But by summer's end, these fears had largely dissipated. On Monday, November crude futures settled at $61.45 a barrel.

"We have lots of gasoline supply," said Joanne Shore, an Energy Department analyst. Data maintaned by her agency show U.S. inventories of gasoline at 207.6 million barrels, 6 percent more than last year and slightly above the five-year average for this time of year.

Asked if it was possible that oil companies would reduce their prices in order to help Republicans, Shore responded: "What company in their right mind would step forward to kill their profit?"

At a suburban Miami Mobil station, where regular was selling for $2.66 a gallon, no one was buying in to the conspiracy theory.

"The decrease of gas prices is simply due to a seasonal adjustment of price," said Javier Gudayal, a 48-year-old civil attorney. "And that the Bush administration does not have the power to manipulate."

But in Los Angeles, which has some of the highest gasoline prices in the country, motorists wouldn't rule out the possibility of a government eager to sway the electorate.

Twenty-eight-year-old attorney Amnon Siegel sensed more than serendipity at work.

"I'm sure there's some sort of string-pulling going on," Siegel said, referring to the government.

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Associated Press Writers Jan Dennis in Peoria, Ill., Alex Veiga in Los Angeles, Will Lester in Greenwich, Conn., and Damian Grass in Miami, contributed to this report.