What's behind the drop in gas prices?

It's not exactly Christmas in July, but American drivers are getting an unexpected summertime gift as a dip in oil prices is results in the lowest prices at the gas station in three months.

"Motorists have some nice relief coming at the pump to look forward to in the next week to two as these drops make it to retail outlets," GasBuddy.com senior petroleum analyst Patrick DeHaan blogged on Monday. "Over the next week, the national average will fall back under $3.50/gal -- something we haven't seen since April, and will also drop under last year's average in the next few days."

As of Monday, according to AAA, the national average price for a gallon of regular unleaded gasoline was $3.61. That's four cents lower than a week earlier and five cents less compared to last month. This time last year, that average price was $3.60 per gallon.

Part of the reason for this unusual price slump is the relative calm in international oil supplies of late. AAA notes that, while the situation in Iraq is far from resolved, major disruptions in oil production there are "increasingly viewed as unlikely."

Oil production has also resumed in Libya, while production and oil distribution in the geopolitical hotspots of Ukraine, Venezuela and Nigeria continues despite ongoing tensions in those nations. Oil production in the U.S. also remains robust.

"There is also the possibility for further declines if we don't see a hurricane or geopolitical tensions ruin things," DeHann said.

"I'd caution motorists as we expect these large decreases to only buy the amount of gasoline they immediately need as prices drop," he continued, "and to shop around as price gaps between stations widen because of the quick decrease in wholesale gas price."

Some gas retailers, meanwhile, are preparing themselves for price wars with the local business competition, as prices at the pump head south.

"This is the lowest I've seen in a while," Ryan Lawson, who manages a Hess Express in Tampa, recently told the Tampa Tribune.

"I compete with other gas stations in my area," he added. "If they drop their prices, I drop mine. You can see their sign and my sign if you stand on the corner. Whatever his prices are, mine are, and whatever prices I have, he has."

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