Retail gasoline prices are falling in the San Diego region and may have enough momentum to drop below $4 a gallon at some stations, as crude oil prices declined again yesterday.

“The independents will be leading the market down,” said Bob van der Valk, who tracks West Coast wholesale fuel prices for a bulk dealer in Seattle. He predicted that within a week, some San Diego stations will be selling gas below $4 – a price unseen for nearly nine weeks.

“Retail (fuel) prices shot up like a rocket in tandem with higher spot and rack values,” van der Valk said. “But retail values have been falling like a feather, lagging far behind the drop in (wholesale) spot prices.”

Industry analysts tied the decline in wholesale fuel prices to the continuing decline in prices for crude oil, as Tropical Storm Dolly grew increasingly unlikely to threaten supply.

Light, sweet crude for August delivery fell $3.09 yesterday to settle at $127.95 a barrel on the New York Mercantile Exchange. Earlier the contract, which will be replaced by September crude today, dropped as low as $125.63. It was crude's fourth decline in the last five sessions.

The decline helped send stock prices higher. The Dow Jones industrial average rose rose 135.16 points, or 1.18 percent, to 11,602.50.

Broader indexes also rose. The Standard & Poor's 500 index jumped 17.00, or 1.35 percent, to 1,277.00. The technology-dominated Nasdaq composite index ended up 24.43, or 1.07 percent, at 2,303.96.

The focus on higher oil's impact on the economy has been so intense that any notch lower breeds investor optimism that the commodities run-up might perhaps be nearing an end, analysts said.

“There's been so many people speculating about oil taking off and how to handle it, the whole economy has been focused on it,” said Todd Leone, managing director of equity trading at Cowen & Co. “Just the fact that it has dropped – a big move down – helps out. There's the perception that this will get the economy going again.”

In San Diego, the average price for regular unleaded gasoline bumped against a peak of $4.59 a gallon several times in June, according to SanDiegoGasPrices.com, a consumer Web site.

The wholesale price for regular gas has fallen about 45 cents over the past week, van der Valk said, to about $3.11 per gallon on the Los Angeles spot market yesterday. Wholesale prices do not include transportation costs and federal and state taxes that are added to retail fuel prices.

The decline led to sharp drops in retail prices at some independent service stations.

Regular was selling at $4.09 a gallon yesterday at the Super Star station on West Main Street in El Cajon and at Express Gasoline on Cardiff Street in southeast San Diego, according to SanDiegoGasPrices.com.

Such prices, however, were well below the region's average retail price of $4.38 per gallon, even after an overnight decrease of 2 cents a gallon, according to San Diego's UCAN, the Utility Consumers' Action Network. The average price for diesel fuel was $5.06 a gallon, the consumer group reported.

The drop in crude prices offered further evidence that investors who only a week and a half ago drove prices to a new high, above $147 a barrel, are now pulling money out of the market.

“This is more of the long exit from the market by the hedge funds,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

There are also indications that high oil prices are killing off demand, especially in the United States, the world's largest oil consumer.

In its weekly pump spending survey, MasterCard found U.S. gasoline demand dropped last week for the 13th week in a row. Demand fell 3.3 percent compared with the same week a year earlier, according to the survey. Since the start of 2008, gasoline demand is down 2.2 percent.

The Associated Press contributed to this report.