Gas Prices Fall To $3.50 As Economic Stall Slams Crude-Oil Costs

By John Voelcker

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Remember $4 gasoline?

It was just last May that gasoline soared to an average price of $4 per gallon across all U.S. markets, with even the cheapest pumps showing prices of $3.50 or more.

What a difference a few months makes.

Gasoline has now fallen below $3 a gallon in a handful of areas, including parts of Texas, Missouri, and Michigan.

And the median gas price among all 50 states--it varies considerably, depending on what state you live in--works out to $3.53 as of this morning.

INFOGRAPHIC: What's Behind The Gas Prices You Pay At The Pump?

The decline in fuel costs is due to plummeting crude-oil prices, resulting from concerns over the potential for another recession in the U.S. and European economies. Oil has fallen below $80 a barrel, dropping 9 percent last week alone.

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That's a 30-percent decline over the peak cost of $113.93 in late April, and its impact hasn't fully rippled through the retail gas prices drivers see on their local pumps. Some analysts say average gas prices could fall another quarter, to $3.25 per gallon, by Thanksgiving.

But don't get too complacent. The Associated Press quoted a projection from investment bank Goldman Sachs that oil could rise back to $120 a barrel within six months, seesawing gasoline prices right back up to that $4/gallon average.

Some data seems to indicate that consumers are more likely to buy a car with higher gas mileage not based on gas prices, but on the frequency and velocity of price changes.

In other words, the more prices seesaw--even if they drop as they've done lately--the warier it makes car buyers, and the more likely they are to protect themselves by choosing a car with better fuel efficiency.

For those of you who yearn for the days of $4 gasoline, rest assured it can still be found in one state: Hawaii, where all gasoline has to be shipped into the state's islands from refineries elsewhere.

In the Aloha State, the average price of a gallon of gasoline is roughly $4.25. That's more than a dollar higher than South Carolina, which has the cheapest state average gas price this week.

The priciest gas in the 48 continental U.S. states is in California, where fuel costs are still just a hair under the $4/gallon mark.

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