Despite Sandy, gas prices expected to drop

• Northeast refineries scale back or shut down as storm passes
• Even so, gas prices expected to keep dropping
• Monday's average for a gallon of regular was $3.543, AAA says

Despite the wretched weather Hurricane Sandy is spawning in the northeast USA, lower gas prices still are likely in the forecast.

Unlike Hurricane Isaac, which led to an uptick in prices as it moved through the Gulf of Mexico in August and affected refineries there, Sandy will likely have a more muted effect on the market, experts say.

"We have been on a steady road toward cheaper gas prices nationwide. The storm could mean a small wobble to the upside for a few days, but I suspect prices will resume their downward trend," said Tom Kloza, chief analyst at Oil Price Information Systems.

The Mid-Atlantic and Northeast, where Sandy is striking, is more of a gasoline consumer than a gasoline producer, says AAA spokesman Avery Ash.

"I wouldn't be surprised over the next day or two to see the average price in some Northeastern states move a little bit higher. However, these are likely to be blips on the radar screen," Ash says. "Once refineries come back online and distribution issues are worked out, we anticipate prices returning to their decline."

Gas prices are expected to continue to drop leading to Election Day and continue to fall through the end of the year, Ash says.

Monday's national average for a gallon of regular unleaded was $3.543, down a half-penny from Sunday and down 13 cents from a week ago, according to AAA's daily Fuel Gauge Report. The average has dropped for 18 consecutive days.

Refineries in New York harbor, Philadelphia and Delaware scaled back or shut down Monday because of worries about storm damage and in anticipation of reduced demand.

Although some filling stations along the East Coast reported being out of gas, those reports were isolated and not expected to become the norm.

"The mistake somebody might make would be to leap to conclusions and say they're running out of gas, but the reality is that the gas just hasn't been moved from Point A to Point B," Kloza says. "If you went out today to buy bottled water or batteries, you probably wouldn't be able to find any in the stores. But that doesn't mean that there aren't any."

Tankers and barges haven't been able to bring supplies to New England from elsewhere in the country since about 6 p.m. Sunday, Kloza says. He added that if the storm significantly damages refineries in the Northeast, the impact on markets should be reassessed.

Demand for gas is expected to drop dramatically as tens of thousands of Americans stay home to ride out the storm. Oil prices fell when it appeared Sandy would keep motorists off the road and shut businesses, leading to a reduction in demand.

"This could be the biggest demand destruction event in history," Phil Flynn, a senior market analyst for Price Futures Group, wrote in a report Monday. "The impact on demand may not last for hours but more than likely for days."

Crude oil prices fell 74 cents, or 1.3%, to finish at $85.54 a barrel in trading on the New York Mercantile Exchange. The Nymex was closed Monday because of the storm and evacuations in New York, but electronic trading continued.

Monday's drop continued a decline in oil prices that began after oil prices reached about $100 a barrel in mid-September.

"Hurricanes always destroy demand. They rarely destroy supply beyond a few days," Kloza says.

Contributing: Associated Press.