By Richard Valdmanis
NEW YORK (Reuters) - U.S. gasoline pump prices are poised to head lower following a large drop in the wholesale market, blotting out doomsday predictions of $3 gasoline this summer, industry experts said Wednesday.
``There was a lot of fear that drove prices up to begin with, and now it's clear that that fear was misplaced,'' said Ken Miller, analyst for Purvin and Gertz in Houston. ``Pump prices are certainly going to come down.''
Wholesale gasoline prices in most areas of the country have fallen between 15 and 25 percent since their highs at the end of May due to steadily growing supply. The cost of the fuel fresh from refineries in the Gulf Coast is now as low as 73 cents a gallon, compared with 91 cents less than two weeks ago.
The supply growth has erased a deep deficit and brought U.S. gasoline stocks to more than six million barrels, or 3 percent, ahead of last year. This is attributed to a brisk domestic refining pace and strong imports, according to the American Petroleum Institute (API).
The outlook could awaken the nation's motorists from their gasoline nightmare, caused by near-record retail prices of $1.69 a gallon, and more than $2 a gallon in certain areas of the West Coast and Midwest, according to the American Automobile Association's (AAA) daily survey.
The high prices were driven by fears of short supplies this summer -- a season of traditionally high gasoline demand -- and recollections of last year's spike in the Midwest which drove prices as high as $2.75 in some major cities.
But this summer's relief is not likely to come immediately, analysts said, since retailers often take two weeks or more to start reflecting their lower costs at the pumps.
``It looks like the improved supplies will be depressing gasoline prices at the marketplace,'' said Jerry Cheske, spokesman for the AAA. ``But, historically speaking, retail prices are slower to follow wholesale declines than increases.''
Cheske added that regional supply disruptions, like a refinery shutdown or a pipeline leak, could send prices at some service stations the other way. Also, Iraq's cutoff of most of its oil exports due to a row with the United Nations (news - web sites) could keep crude oil prices high and offer support for gasoline values.
Nonetheless, the improved outlook puts the prospect of $3 gasoline farther out of reach, even after reports of oil companies ordering large number '3's in California this spring to hang in the dollar slot at filling stations.
``The shortage is over,'' said one Texas gasoline trader Wednesday. ``There's plenty of gasoline out there.''