And with motorists driving less and supplies growing even through the summer driving season, analysts were predicting $2.50 a gallon or less nationally before the end of the month. The supply of gasoline was climbing, beating the volume that had built up before prices crashed last year, according to the Energy Department's analysis released this week. The low demand 'was most noticeable in states like California, Nevada and Arizona,' said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey, who was predicting the big drop in retail gasoline prices. California's budget deficit was only adding to the deep financial uncertainty of motorists and helping to rein in their driving even more, Kloza said. 'The good news is cheaper gasoline for the rest of the month. The bad news is state IOUs and your 401k,' Kloza said. Crude oil supplies were running 53.4 million barrels ahead of last year at 347.3 million barrels July 3, the Energy Department said. Gasoline stocks rose by 1.9 million barrels to 213.1 million barrels. The average price of a gallon of gasoline nationally Thursday was $2.580, according to OPIS, which with Wright Express tracks prices through about 100,000 daily credit card transactions at U.S. service stations. That was about 4.9 cents below the week ago price but $1.528 lower than 2008, when gasoline prices neared their all time record. OPIS said the average in California was $2.939 a gallon, 4.6 cents below the week-ago price and $1.613 a gallon below the year-ago price. Oil's direction was less clear Thursday, but some analysts said a close below $60 a barrel could lead to a repeat of 2008's oil collapse, bringing futures prices as low as $20 a barrel. Crude oil futures for August delivery closed up 27 cents to $60.41 a barrel on the New York commodities market after trading as low as $59.25 during the day. Oil is down more than 17 percent since trading as high as $73.38 on June 30. 'There are concerns that the green shoots of economic recovery are withering and oil could go a lot lower,' said Phil Flynn, vice president and senior market analyst for Alaron Trading Corp. in Chicago. Some analysts said that oil hovering around $60 could go higher quickly when the global recession finally begins to recover. 'We believe the recovery scenario will take place in the first half of 2010. Demand will reestablish itself,' said James DiGeorgia, editor of Gold and Energy Advisor. 