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Gasoline heads to $2 a gallon as oil falls below $50

Crude oil's descent to $50 a barrel may push US gasoline pump prices below $2 a gallon for the first time in more than two years, based on historical pricemoves.

The 17% drop in oil this month has caused benchmark New York gasoline futures, which are based on wholesale prices, to tumble 15%. Gas station prices usually lag behind futures by four to eight weeks, according to the US Energy Department. A corresponding drop for retail gasoline would lower the nationwide average to about $1.95 a gallon. „There is nothing to continue to prop prices up at the pump,” said Nathan Schaffer, manager of the group that tracks gasoline refining and marketing for PFC Energy, a consulting firm in Washington. He predicts a $2 price no later than March. The last time the average price for regular gasoline was below $2 was in March 2005, according to the AAA, the largest US motorist organization.

Prices are already below $2 in some parts of the country, including Oklahoma City, Detroit and Kansas City, Missouri. The nationwide average was $2.196 yesterday, down from a peak of more than $3 during the summer. Falling gasoline prices help the economy by giving consumers more money to spend elsewhere, said Drew Matus, senior economist at Lehman Brothers Holdings Inc. in New York. „The psychological impact of seeing a one before the price per gallon would actually boost the impact,” Matus said. „Consumers get to think that gas prices are not really that bad after all.” Gasoline for February delivery rose 0.5% to $1.3614 a gallon as of 9 a.m. on the New York Mercantile Exchange. Prices have dropped 42% in the past six months. Crude oil rose 0.3% to $50.62 a barrel after falling to $49.90 yesterday, the lowest since May 2005. (Bloomberg)