CONSUMERS rejoice as gas prices plummet despite predictions, down quarter from May

<br>DETROIT (AP) _ Dire predictions of $3-a-gallon gasoline this summer haven't materialized, with many parts of the country seeing lower prices at the pump than a year ago. <br><br>The reason: An

Tuesday, July 17th 2001, 12:00 am

By: News On 6

DETROIT (AP) _ Dire predictions of $3-a-gallon gasoline this summer haven't materialized, with many parts of the country seeing lower prices at the pump than a year ago.

The reason: An unexpected abundance of supply as the oil industry rushed to cash in on the high prices.

``Thank God,'' said cab driver Roberta Pitts, 29, who was overjoyed when prices dropped to as low as $1.25 a gallon this weekend.

``It would have really hurt if it went up like they said it was going to,'' said Pitts, a single mother of two who foots half the cost of gas to drive for Direct Contact taxi company in Detroit. ``Already, it was really affecting me. All my money was going to pay the bills.''

As of Friday, the national average price of gasoline, including all grades and taxes, was $1.51 _ down 12.8 cents since June 22. That means consumers are paying 16 cents a gallon less than a year ago, and 25 cents a gallon less than at the price peak of $1.76 in May, according to the Lundberg Survey of about 8,000 gas stations nationwide.

The spring price surge was sparked by an April report that supplies of reformulated gasoline were 4 million barrels below a year earlier, said Michael Lynch, chief energy economist at DRI-WEFA, an economic consulting firm in Bedford, Mass.

Because the gap between supply and demand is the narrowest it has been in 25 years, speculators overestimated the severity of the ``very marginal'' shortage, Lynch said.

``In a nutshell, people overestimated the tightness of supply. Speculators drove up prices,'' Lynch said Monday.

Then, he said, ``the industry response to the higher prices resulted in a glut of supply.''

``Nobody thought supply could come through so strongy,'' said George Beranek, oil market analyst for Petroleum Finance Co., an energy industry consulting firm in Washington.

``The U.S. market was sending a signal that it needed all the supply it could get. And it got it,'' Beranek said. Refineries produced more than expected and imports were unusually high, he said.

Prices have been so good, Huey Bowman of Tulsa, Okla., took an impromptu trip to Little Rock, Ark., last weekend.

In Tulsa, where gas prices are the lowest in the nation, Bowman squeezed out $5 of gas at a Texaco station selling unleaded for $1.15 a gallon. Honolulu had the highest price at $1.91 a gallon.

If prices had reached the predicted summer highs, Bowman said, ``I would have been catching the bus.''