$2 Gas by Christmas?

"One of the most astonishing weeks in watching crude prices I've ever witnessed," expert says

$2 gas GasBuddy OPEC (CSP Daily News / Convenience Stores / Gas Stations)

NEW YORK -- For the first time in five years, under-$3 gasoline is making a comeback in some areas of the United States, reported Bloomberg. And retail stations scattered across the South and Midwest are about 20 cents shy of the $2-a-gallon mark.

In New York, gasoline futures slid more than 13 cents November 27 after the Organization of Petroleum Exporting Countries (OPEC) failed to cut oil production to stem a glut. That decline alone could drag down pump prices by as much as 20 cents a gallon, Michael Green, a spokesperson for the Heathrow, Fla.-based motor club AAA, told the news agency.

"We could see the cheapest 1% of stations get within a few pennies of $1.99 over the next two weeks," Patrick DeHaan, a senior petroleum analyst at GasBuddy, also told Bloomberg. "We'll see at least one station in the nation at $2 by Christmas. And that's not really a prediction at all. That's more like a certainty."

In a December 1 GasBuddy.com blog post, DeHaan said, "Oil prices have been demolished in the last 72 hours as OPEC decided against a production cut, which will open the flood gates to even more gas price declines."

He continued, "In my decade of watching oil and gasoline prices, I don't think I've seen as steep a decline in a 48-hour time frame as what we saw on Thanksgiving Day and into last Friday as OPEC put off any decrease in production. This is perhaps one of the most astonishing weeks in watching crude prices I've ever witnessed, and motorists will likely be giddy at what I see in our gas price crystal ball: a 15-to-25-cent drop over the next several weeks, bringing the national average down to the $2.50s by Christmas."

The last time the country's average gas price was below $2 was on March 24, 2009, said the Bloomberg report.

Gasoline futures sank below $2 a gallon this month for the first time since Sept. 29, 2010. The average pump price was $2.792 on November 27, down 90.4 cents from this year's peak of $3.696 on April 26 and the lowest since Oct. 8, 2010, according to data compiled by AAA. The average has fallen for 64 consecutive days, the longest streak since 2008, Avery Ash, AAA's director of federal relations, told the news agency.

OPEC, responsible for about 40% of the world's oil supply, will maintain its collective crude output target at 30 million barrels a day, Saudi Arabia's Oil Minister Ali Al-Naimi said after discussions in Vienna on November 27.

"Given that OPEC has decided not to cut production and, for all intents and purposes, are entering into a market share war with the rest of the world, $2 a gallon could be in the cards," said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston, told the news agency. "I don't think anyone would have said that at the beginning of the year, or a month ago, or even a week ago."

The nation's cheapest gasoline was at a DM Food Mart in Oklahoma City that was selling regular for $2.18 a gallon late last week, DeHaan said.

The first place to reach $2 gasoline will probably be somewhere in the U.S. Southeast where fuel taxes are low and gas stations have cheaper supplies flowing in from oil refineries along the Gulf Coast, said Ash. "We're talking about limited markets in maybe South Carolina, Mississippi, Tennessee."

The chances of gasoline prices averaging below $2 a gallon across the nation remain "highly unlikely," Ash said. "You're still looking at a national average at $2.75. To get to $2, you'd need to see crude prices drop another $25 to $30 a barrel."