Those low prices are the latest evidence of a steep demand dropoff driven by a sickened economy and conserving consumers.

“This kind of drop is unprecedented in the history of the oil business,” said Tim Hamilton, director of an independent service station group, Automotive United Trades Organization and a well-known critic of the oil industry.

The average price of regular gasoline in Pierce County, which peaked at $4.34 a gallon in mid-July, fell to $2.22 Wednesday, according to TacomaGasPrices.com, a Web site that tracks retail gasoline prices.

Average gas prices in Pierce County haven’t been that low since February 2005, according to price-tracking services.

The price refiners are charging dealers changes downward almost daily, Hamilton said.

“Prices to dealers are falling as much as 20 to 25 cents a day,” said the oil industry critic.

The two sub-$2 prices appeared at the Gig Harbor Costco and an Arco station.

In some states in the country’s midsection, gas prices dropped to $1.50 a gallon, according to AAA.

Behind the price reductions were crude oil prices that have fallen 60 percent since mid-summer, when crude prices topped $147 a barrel.

Retail gasoline prices dipped for a 17th week since July 4, falling below $2 a gallon in a number of states and approaching $1.50 at some service stations. The price of crude fell again too, hitting a 20-month low.

Light, sweet crude for December delivery fell $3.17 to settle at $56.16 a barrel on the New York Mercantile Exchange, the lowest closing price since March 2007. Prices had dipped a dollar below that earlier in the day.

The sharp reduction in gas prices is putting money back in the pockets of consumers who’ve suffered because of sharp stock and investment declines, rising unemployment and weak retail activity.

Industry analysts predict that gas prices are likely to stay down until demand, which is down 4 percent from its peak, revives.

The U.S. Energy Information Administration predicted Wednesday that gas pump prices will average $2.37 a gallon in 2009. Just a month ago, that same agency predicted that gas would average $3.56 a gallon next year.

Hamilton predicts prices may drop somewhat lower, rise slightly and then stabilize if consumers don’t resume their gas guzzling habits.

“If the American public pretends that $4.50-a-gallon gas never happened and goes back to its old way of doing things, it will bring on the ruin of the economy,” he said.

The sudden steep drop in gas prices already is causing major problems for alternate energy producers who counted on stable prices to make their alternative products competitive.

“The next time gas goes up, it’ll go to six bucks a gallon,” predicted Hamilton if consumers don’t keep conserving.

The wholesale price reductions have been good for independent gasoline retailers, he said, because the wholesale prices are falling faster than the retail prices, and dealers can make money. In the quick run-up of gas prices this summer, independent dealers were caught on the other side of the price squeeze.

Wholesale gas prices rose quicker than they could raise retail prices, he said. Lower prices also save dealers money because credit card companies charge them a percentage fee for use of their cards based on the total cost of the transaction. The lower the cost of a fill-up, the lower the credit card transaction fees, he said.

John Gillie: 253-597-8663

blogs.thenewstribune.com/business

The Associated Press contributed to this report.

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