US gasoline prices cheapest since January

NEW YORK (AP) — The price of gasoline has dropped to a five-month low, giving drivers some relief ahead of the July 4 holiday.

The national average fell to around $3.40 per gallon on Tuesday. South Carolina, at $2.987, has the distinction of being the first state with an average below $3 since February 2011. Even in states that impose high gas taxes, such as New York and California, pump prices are averaging less that $4.

Americans are now spending roughly $200 million per day less on gas than in early April, when gas peaked at $3.94 per gallon. And analysts are expecting further declines. One economist on Tuesday forecast the national average will soon fall to $3.10 per gallon.

Still, saving a few dollars on gas only does so much for consumer psychology in the current economic climate. The Conference Board's reading of consumer confidence fell in June for the fourth month in a row. It said worries about the unemployment rate, low home values, a shaky stock market and a struggling European economy could hamper consumer spending, which accounts for 70 percent of U.S. economic activity.

Cheaper gas hasn't encouraged people to drive more either. They're buying about 3.5 percent less gasoline than they did last year, even though a gallon is now 18 cents cheaper.

"There's still so much uncertainty out there," said Gene McGillian, a broker and oil analyst at Tradition Energy. "The economy's still in troubled waters. Unemployment hasn't fallen that much and people are just more conscious about how much they drive."

MasterCard SpendingPulse, which tracks gasoline purchases around the country, said Americans have bought less gas for a record 66 weeks in a row when compared with how much they purchased a year before.

Worries about the global economy are keeping oil near 8-month lows. Prices have dropped more than 20 percent since May 1, though they rebounded Tuesday as European leaders prepared to discuss a slate of proposals to stabilize the region's economy. Meetings are scheduled for Thursday and Friday.

A failure to finally find a solution would likely push the eurozone economy back into recession and cut energy demand in a region that consumes 16 percent of the world's oil.

Benchmark U.S. crude added 15 cents to end the day at $79.36 per barrel in New York while Brent crude added $2.01 to end at $93.02 per barrel in London.

Oil was due for a rebound after the steep drop, McGillian said. Brent crude jumped after Norway announced that crude production will decline in the North Sea after about 700 oil workers went on strike. Brent crude comes from the North Sea.

In other futures trading, heating oil added 3.8 cents to finish at $2.5765 per gallon while wholesale gasoline was steady, ending the day at $2.6451 per gallon. Natural gas added 7.3 cents to finish at $2.767 per 1,000 cubic feet.