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Oil and Gas Prices Decline in US Amid Hope Katrina Damage May Be Less than First Predicted

Oil and gasoline prices in the United States fell back Tuesday from recent big advances. There is optimism that the economic costs of Hurricane Katrina may be less than first predicted.

Crude oil prices fell sharply Tuesday as an increasing number of U.S. pumping and refining facilities returned to operation. Crude oil prices fell nearly a dollar to below 67 dollars a barrel, a price lower than before the hurricane struck the U.S. Gulf coast eight days ago. There are indications that gasoline prices, which in some places surged by up to 40 percent after the disaster, are also falling back. Oil markets have been jolted by the emergency release of 30 million barrels of oil from world reserves.

Jeff Thredgold, an energy specialist in Salt Lake City, Utah, tells Bloomberg News he thinks the spike in oil prices is over. "I think it is. You are getting some decline in the demand for gasoline as the U.S. enters the fall from the summer. I think it is interesting that we have this horrific event and oil prices are pretty much unchanged."

Other energy economists are more cautious. Fadel Gheit, the oil and gas specialist at Oppenheimer in New York, believes the longer-term upward trend in oil prices remains in place. "Supply and demand is still very finely balanced. People should not celebrate (this decline), or, if we do, it is too early," he said.

Crude oil prices have more doubled in the past two years.

After being closed Monday for a holiday, U.S. stock markets surged higher on Tuesday amid optimism that economic growth will not be significantly slowed by what some are calling the worst natural disaster in U.S. history. Growth is expected to slow in the current third quarter of the year but expected to advance strongly in the fourth quarter as reconstruction fuels demand for labor and building materials. The economic loss from Hurricane Katrina is now being estimated at $100 billion.