Washington-area gasoline prices have dropped by 3 cents a gallon since mid-July -- the most dramatic summertime price decrease recorded by the American Automobile Association's local division, the group said yesterday.

The biggest share of the price decrease since July 4 has been in Virginia, where the average gallon of gas fell 8.6 cents. District of Columbia prices dropped 0.7 cent, while Maryland prices fell 0.3 cent.

Declining wholesale prices are the major reason for the drop in retail prices, according to the local automobile consumer group. The price that local dealers pay for the gas they sell has dropped by half a penny in the past month, reflecting falling crude oil prices and larger-than-usual supplies of imported, already refined gasoline, which keeps domestic refiners competitive.

The demand for gasoline generated by summer travel has not changed from this time last year, which also has helped to keep prices down, AAA Potomac said.

Gasoline now costs an average $1.346 a gallon in metropolitan Washington, down 3.3 cents since the AAA's survey of 100 area service stations before the July 4 holiday. Traditionally, prices rise nearly 3 cents between July 4 and Labor Day before tapering off for the winter months.

Only once before -- last year at this time -- have local pump prices fallen this significantly during the summer travel season, AAA Potomac said.

As a result of Virginia's large price drop, that jurisdiction is now the least expensive place in the region to buy gasoline, at an average of $1.334 a gallon. Maryland follows at $1.343, and the D.C. average is $1.365.

AAA Potomac attributed Virginia's lower price now partly to its large increase earlier in the year.

"Virginia had the largest increase in the area -- of about a nickel a gallon," said Doug Neilson, a spokesman for AAA Potomac. "Now Virginia is having the largest decrease as dealers are rolling their prices back to remain competitive and to recoup some of their losses."

The price decreases in the area are primarily affecting prices for credit-card purchases at full-service pumps, Neilson said. "Consumers driving around won't really notice that much of a difference in self-service pump prices," he added.

Despite an anticipated increase of 2 cents a gallon in the cost of producing the lower-lead regular gasoline now mandated by the Environmental Protection Agency, area prices for regular leaded gas have risen less than a penny since July 4. Dealers hiked prices for regular leaded the most -- 0.7 cents -- at self-serve pumps, where 65 percent of all gas in the area is sold.

Under a directive from EPA, the first step in the gradual reduction of lead content took effect July 1, when the standard was dropped from 1.1 grams of lead per gallon to 0.5 gram. The next phase begins Jan. 1, when lead content must be reduced to 0.1 gram.

Except for the increase in self-serve regular leaded, the only other price jump was for diesel fuel, which rose 2 cents. Diesel fuel is now available at fewer than half the stations AAA Potomac surveyed.

The average price of gasoline in the area at this time last year was $1.312 a gallon; two years ago, it was $1.396 a gallon.