D.C. motorists get a ‘break’ as gas drops

Gas prices are dropping quickly thanks to an early end to the summer driving season and the dearth, so far, of devastating Gulf Coast hurricanes.

The price of regular grade is falling faster in the Washington area than nationally. At $2.86 a gallon yesterday morning, it’s down 10 cents in the past week and 26 cents from a peak of $3.12 a little more than a month ago, according to GasBuddy.com. The normally large premium Washington pays for gas compared with the rest of the country has narrowed from 12 cents to 3 cents a gallon.

“It is about time. We need a break from all the high prices,” said Todd Rex, a driver commenting on the sudden dive in pump prices.

Energy analysts credit the early beginning of the school year and early end to vacation season that normally lasts until Labor Day, which is next weekend. Oil prices also have been declining. Yesterday, the price of premium crude plummeted $1.90 to $70.61 a barrel in New York trading after the threat to Gulf Coast oil fields and refineries from Tropical Storm Ernesto was downgraded.

Ernesto was “a whole lot of fuss about nothing, so the price is coming down,” said William Adams, chief energy strategist at LaSalle Futures Group Inc.

What was expected to be an active hurricane season this year was greatly anticipated in the oil market and drove up prices at the beginning of the summer, so the lack of destructive storms is causing an “overreaction” on the down side, he said.

But analysts caution that with the hurricane season not over, another major storm could send oil and gasoline prices up again, as could the looming confrontation over Iran’s nuclear program. The U.N. Security Council gave Iran until Thursday to halt its nuclear enrichment program or face sanctions, but Iran has insisted it will continue enriching fuel for what it claims are peacetime energy uses.

“It is an unusual market because usually right through Labor Day” prices are high, said Kevin Beyer, owner of Performance Fuel, an independent gasoline station. Independent stations are the first to reflect falling or rising market prices for oil and gas, as they buy on the spot market rather than negotiate gas contracts with national oil companies at fixed prices as brand name dealers usually do.

“Most of the independents are below $3,” Mr. Beyer said. “We haven’t seen that in a while, so it’s a nice sight to see.”

The relief from $3 gas didn’t come too soon for burdened American consumers, whose incomes have fallen behind inflation this year largely because of soaring energy prices.

“The energy shocks have been painful,” especially for lower-income Americans, said Michael J. Silverstein, senior vice president at the Boston Consulting Group. A recent survey by the group found that three-quarters of Americans said high gas prices were forcing them to cut back on eating out, entertainment and vacations, as well as to curb or delay other discretionary purchases and make changes in their lifestyles.

High gas and utility bills have come at the same time consumers are being hit with skyrocketing property tax increases and rising rents, both of which are lagged effects from the housing boom that in the last year went bust and resulted in stagnating or declining house prices.

Many economists fear that the combination of the bursting housing bubble and other consumer hardships could drive the economy into recession.

But Richard Berner, chief U.S. economist at Morgan Stanley, said he is optimistic that the easing of energy prices this month, as well as interest rates since the Federal Reserve decided to pause in its rate-raising campaign, will “offset the housing hurricane” and enable consumers to stay on their feet.

Lawrence Kudlow of Kudlow & Co., a Republican economic adviser, said the downtrend in gas prices is good news for Republican candidates who have been worried that public discontent with the economy and the war in Iraq will bolster Democratic prospects and endanger their hold on Congress.

Anger about high gas prices is a principal reason Americans express little confidence in the economy, which Democrats have been highlighting in their campaigns. Mr. Kudlow expects pump prices to fall to about $2.79 a gallon nationwide in coming days.

“There’s Republican midterm congressional election content in these numbers,” he said.