The San Diego Union-Tribune

It’s been a long time since anybody felt pumped at a gas pump. But at San Marcos’ Hollandia Dairy, a few pennies are translating into psychological relief for wallet-ravaged car owners.

The convenience store and gas station dropped the price of its regular unleaded gas from $3.05 per gallon to $2.99 on Friday, and cut it again over the weekend to $2.97. And a handful or so of other gas stations across San Diego County have also dropped their gas prices below $3 in recent days.

“I’ve been hoping to go under $3 for a long time, it may be just a penny or two, but $2-something sounds like a lot less than $3,” said Klaas Dehaan, the controller at Hollandia.

Gas prices in San Diego County yesterday averaged $3.19 per gallon for regular unleaded, down 6.3 cents since last Tuesday — the biggest downward price move in 15 weeks, according to Charles Langley, a gasoline analyst at the Utility Consumers’ Action Network.

“$2.99 a gallon is an important psychological price point,” Langley said. “If enough dealers are able to lower their prices below $3 a gallon, it could spur further price drops. Prices have been moving down at a snail’s pace, but maybe we’ll see a snail on steroids emerge.”

Or not. Some oil industry observers cite a number of factors that may be contributing to the modest gas price retreat, but also caution that any number of factors could send it surging again.

Oil prices dropped slightly in the wake of the cease-fire in Lebanon, then surged again over worries about Iran, the world’s fourth-largest oil exporter, facing possible sanctions over its nuclear enrichment program.

Still, crude oil prices have eased from a record high of $78.40 set on July 14. World oil crude prices steadied yesterday, with New York’s main contract, light sweet crude for delivery in September, rising 18 cents to settle at 72.63 dollars per barrel.

Fears this month that the shutdown of crude oil shipments from Alaska’s Prudhoe Bay would result in sharp gas price hikes have not materialized. BP‘s partial shutdown of its corroded pipelines was expected to cut production by 400,000 barrels daily, but production was trimmed by only half that, according to some analysts.

Nor has there been a major natural disaster, such as last year’s Hurricane Katrina, to damage oil refineries and drive up gas prices. And the busy summer driving season is coming to a close, which results in less demand for gas, say some analysts.

“The price of gas is dropping because the price of oil has been dropping,” said Carol Thorp, a spokeswoman for the Automobile Club of Southern California, the largest AAA chapter in the United States. “All these world events that get people nervous about gas supply seem to be reaching some conclusion, or at least are situations that can be dealt with.”

Yet while some analysts and consumer watchdog groups speculate that more price cuts at the pump are likely in coming days, no one is ready to declare that the worst is over.

“The world price of crude oil, and concerns about Israel or Iran, don’t mean anything when it comes to the price of gas in your hometown,” said Tim Hamilton, an energy consultant to the Foundation for Taxpayer and Consumer Rights in Santa Monica. “What drives the price is how much gasoline you have on hand, what’s in your inventory.”

Last week, an investigation by the California Energy Commission concluded that the gasoline price surge this spring was due largely to refinery shutdowns and the export of gasoline to other states.

Gasoline production in California fell to a five-year low, while exports of the fuel from the state rose to a five-year high. Only a small percentage of the gas price increase could be attributed to higher crude-oil costs, the commission found.

California refineries, which posted the highest profits in the nation this year, have an incentive to keep supply tight, Hamilton said.

“If you drop the ball in California, you will make hundreds of millions of dollars, and if you drop it really bad, you can make billions,” he said. “Right now, we have enough refined gas to keep us going along. And if the crude oil supply remains consistent, prices may stay right about where we are now on into September,” Hamilton said. “But if there is a problem, or a refinery production slowdown, we could hit $4 a gallon very fast.”