NEW YORK, USA - U.S. gasoline prices have dropped more than $1.50(S$2.23) per gallon since the summer's record, but with the economy slowing low prices may not be enough to convince Americans to return to their gas-guzzling ways.
Pump prices peaked above $4 per gallon this summer, prompting motorists in the world's top consumer to drive 15 billion fewer miles (24 billion km) in August than year-earlier levels.
The drop in demand was bigger than the decline during the 1970s oil crisis and, with the economic crisis adding to consumer woes, experts say it may not rebound soon.
"Just because prices come down, I don't think you're going to see demand return. I don't think people are going to start driving their 10-mile-per-gallon SUVs again, or buying them again, just because prices have come down," said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.
"I think it's going to be a long time before we see that come back."
Cutbacks in fuel consumption resulted in the largest volume decline in U.S. oil demand in 26 years, according to the U.S. Energy Administration, with overall demand in August down 8.4% versus last year.
Oil prices have now fallen from their high above $147 per barrel in July to around $65 per barrel- a 56% drop in a little more than three months - due to slumping demand.
National average gasoline prices have fallen 38% from their $4 record to $2.55 per gallon on Thursday, according to AAA's Fuel Gauge report.
"We are now in a situation where in the United States we have reduced consumption of oil products by 1.5 million barrels per day over where we were a year ago," said Ed Morse, chief economist for LCM Commodities in New York.
ECONOMIC UNCERTAINTY
"Now we're seeing the prices drop quickly ... but we still, obviously, have a big issue around the economic turbulence that's still here," said Michael McNamara, vice president of research and analysis at MasterCard Advisors.
"Over the spring and summer, I think it was probably more price driver (of demand). Now with prices dropping so quickly, I think the economic turbulence is probably more on people's minds."
U.S. gross domestic product contracted at an annual rate of 0.3% in the third quarter, the sharpest drop in seven years, which has heightened worries of a recession.
Last week the average national gasoline price fell to the same level as a year ago, but demand was still down 6.4%, according to MasterCard's weekly report.
"Consumer behavior doesn't necessarily change on a dime. It will probably take a while for people to revert to old habits," McNamara said, noting there were some signs of long-term behavioral change, such as an increase in mass transit ridership and employers offering flexible commuter schedules.
In addition, consumers are turning from big gas-guzzling vehicles toward more more fuel efficient cars.
U.S. sales of low-fuel-mileage light trucks and SUVs plummeted 33% for the year through September, and the Big Three U.S. automakers - General Motors, Ford Motor Co and Chrysler - have announced plant shutdowns and plans to build more small cars. "I think there is a shift in consciousness," Bradley Berman, editor of HybridCars.com, a website that tracks hybrid vehicles, said, noting interest in fuel-efficient cars was rising.
