Nov. 23 (Bloomberg) -- The average price of regular gasoline at U.S. filling stations fell to $1.97 a gallon as demand declined in a slumping economy.

Gasoline slipped 33 cents, or 14 percent, in the two weeks ended Nov. 21, according to oil analyst Trilby Lundberg’s survey of 7,000 filling stations nationwide.

“There are three main reasons why gasoline prices are falling,” Lundberg said in a Bloomberg Radio interview. Oil continues to fall, closing “lower than $50 this past Friday.”

Gasoline demand has decreased with the change in seasons, Lundberg said. Refiners also have given up profit margins, she said.

“Margins are too skinny and will have to rise or they will have to shut in a lot more refining capacity,” she said.

Crude oil, which accounts for about 59 percent of gasoline’s pump price, has tumbled 66 percent from a record $147.27 a barrel reached July 11 on the New York Mercantile Exchange.

AAA, the nation’s biggest motoring club, said today that regular gasoline at the pump averaged $1.929 a gallon, down 53 percent from the record $4.114 in July. Prices Nov. 21 dropped below $2 a gallon for the first time since March 2005.

U.S. fuel demand in the four weeks ended Nov. 14 averaged 19.1 million barrels a day, down 7 percent from a year earlier, according to the Energy Department. Motorists drove less in September for an 11th consecutive month, the Federal Highway Administration said Nov. 19.

Crude Slides

Crude oil for January delivery on the New York exchange gained 51 cents to $49.93 a barrel on Nov. 21. The futures have dropped 48 percent this year. Gasoline futures advanced 5.73 cents, or 5.7 percent, to $1.0643 a gallon.

U.S. gasoline demand dropped 2.8 percent in the week ended Nov. 14 as prices fell to the lowest since February 2007, a MasterCard Inc. report Nov. 18 showed. Motorists bought an average 9.031 million barrels of gasoline a day, down from 9.294 million a year earlier. It was the 30th consecutive decline in fuel use.

Lower demand comes amid tightening credit markets, bank failures and rising unemployment claims, as the U.S. enters a recession.

The highest average price for self-serve regular gasoline in the U.S. was $2.81 a gallon in Honolulu, Lundberg said. The lowest was in St. Louis at $1.61 a gallon. On New York’s Long Island, the price was $2.34 a gallon.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

Last Updated: November 23, 2008 17:26 EST