Anchorage Daily News

Alaska oil prices on Tuesday dropped below $50 a barrel for the first time since January 2007 as world crude prices continue to soften in the face of slackening demand.

However, there were signs that plummeting gasoline prices have begun to bring American motorists back to the pump, which could shore up demand.

On West Coast open markets, Alaska oil fetched $49.89 a barrel, down $1.56 for the day. The price has collapsed since peaking at $144 a barrel in early July, driven down by a widening global recession.

Oil revenue forms the foundation of the Alaska state budget. The current year's budget began July 1, and when the legislators wrote it the state was forecasting an average oil price of $83 a barrel. Despite the current relatively low figure, the price has averaged just over $100 since July 1.

The price of other grades of oil from around the world also fell Tuesday, but not as much as Alaska oil on the West Coast. The reason was unclear Tuesday afternoon.

MasterCard SpendingPulse reported Tuesday that even though consumption of gas for the weekend ended Friday was down 2.8 percent from a year ago, it was the smallest year-over-year decline in more than two months. Americans used about 100,000 more barrels per day of gas for the week than they did the previous week.

"Demand destruction has definitely subsided significantly," said Michael McNamara, a vice president at MasterCard SpendingPulse.

The Labor Department reported Tuesday that wholesale energy prices dropped by 12.8 percent in October, the biggest one-month fall since 1986. All types of fuel declined, with gasoline falling by a record 24.9 percent, surpassing the old mark set in 1986.

Home heating oil prices fell 9.6 percent, natural gas intended for home uses fell by 5.9 percent, and liquefied petroleum gas dropped by 27.6 percent, the biggest decline in more than three decades.

Analysts noted that this is the time of year when energy prices bottom out.

"The first cold blast is a reminder that even if the economy is slow, we still have to heat our house," said Phil Flynn, an analyst at Alaron Trading Corp.

Outside of the oil-market trading pits, the remarkable decline in prices has played out at the corner gas station, with Texas, Minnesota and Colorado joining Ohio in the last week as states where average retail gasoline prices fell below $2, according to the Energy Information Administration.

Nationwide, retail gasoline prices fell for an 18th week since the July 4th holiday. Prices plummeted 15 cents, or 7 percent, to a national average of $2.07 a gallon, according to the IEA. Prices are down more than $1 from a year ago.

Prices at the pump fell nearly 2 cents overnight to $2.07 nationally, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices have fallen almost 90 cents in the past month.

Alaska gasoline prices remained the nation's highest, with an average price of $3.15 a gallon Tuesday, the same as on Monday, AAA said.

The average in Anchorage was $2.92 a gallon, down 2 cents from Monday, AAA said.

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