The price of Maine lobster, which accounts for 80 percent of the U.S. catch, is tanking.

The primary factor, a drop-off in demand by penny-pinching diners, has been in place since summer. But a secondary problem recently surfaced: the global banking crisis left Canadian processors short on credit, trapping Maine lobstermen and dealers with too much supply.

While bargains abound for lobster lovers throughout the Northeast, there's growing angst in New England fishing communities. One small village held a lobster bake on the town pier to unload excess lobsters and help out the local fishing fleet.

"This is as devastating to the state of Maine as Hurricane Katrina washing away all the boats and blowing down all the wharves," said Dana Rice, a lobster dealer from Gouldsboro who's witnessing the industry's biggest struggle in his 30-plus years in the business.

As always, the problem boils down to supply and demand. But these days it's a bit more complicated than usual.

The recent crisis in the global financial system resulted in lines of credit being cut off to several lobster processors, including some in Canada who have relied on Icelandic banks that have failed, according to John Norton, president and chief executive of Cozy Harbor Seafood Inc., a seafood processor in Portland.

More than half of Maine's lobster harvest is typically shipped to Canadian processors. But this year is hardly typical.

Jim Wilson, a professor of marine science and economics at the University of Maine, is astounded how the Maine lobster industry is being slammed indirectly by the mortgage crisis, Wall Street derivatives and bank failures in Iceland.

"It's rather amazing the interconnectedness that has built up in the economy," Wilson said.

Even before the credit crisis intensified, lobster purchases by chain restaurants, cruise lines and other businesses were way below normal this year as consumers reined in spending. A strong harvest only amplified the problem.

The industry has scrambled to move product, but with Maine lobstermen alone hauling around 400,000 pounds a day, that's no easy feat.

Hannaford, Shaw's and other supermarket chains in the Northeast agreed to cut prices, and restaurants launched lobster promotions to help out, said Dane Somers, executive director of the Maine Lobster Promotion Council.

Along the Portland waterfront, seafood shops are selling lobsters for as cheap as $3.89 a pound, which is about the price of bologna at the deli counter.

Retailers as far south as Washington, D.C., are selling live lobster for as little as $5.99 a pound, said Neal Workman, founder and head of The Fisheries Exchange, a Boston-based company that tracks prices, catches and other market information for the lobster industry.

The lobster promotion council has also taken the unprecedented step of purchasing radio and newspaper ads encouraging people to eat lobster.

Michael Tourkistas, CEO of East Coast Seafood in Lynn, Mass., was in Florida this week visiting chain restaurant and cruise line companies in hopes of drumming up business. East Coast Seafood handles about 15 million pounds of lobster a year.

"This is something that's never happened before," Tourkistas said from Florida. "So it makes it difficult to know what's going to happen next."

Lobster is Maine's most valuable fishery. Its haul of roughly 63 million pounds last year was worth some $300 million at the dock with a total economic impact estimated at about $1 billion.

The industry has enjoyed good times in recent years. The annual catch has more than doubled in the past 15 years; at the same time the average price paid to fishermen has risen more than 75 percent, with lobstermen averaging $4.44 per pound for their catch last year.

Lobster prices fluctuate widely during the year depending on supply and demand. Still, it was a seismic jolt when the "boat price" _ the price lobstermen receive for their catch _ fell to as low as $2.25 a pound this month.

Prices hadn't dropped that low since the days after 9/11, said Norton.

But the hit lobstermen are taking this year is more painful than back then. That's because the cost of doing business is far greater now, with the high price of bait, rope and diesel fuel _ even after recent declines.

The plunge in lobster prices comes at the time of year when fishermen are trying to put away money to last through the coming cold-weather months when they aren't pulling traps. Many lobstermen will have trouble making boat payments and paying bills this winter, said Bob Baines, a lobsterman in Spruce Head.

"The trickle-down of this will be very difficult because the tens of millions of dollars that will be lost won't be pumped into the local economies," Baines said. "That'll have an effect on small communities up and down the coast."

The situation has shown signs of easing lately, with consumers buying lots of product at those low prices and the credit markets thawing worldwide.

But there are still concerns about what's ahead.

At the end of November, fishermen begin hauling traps in lobster-rich southern Nova Scotia, which will put more lobsters on the world market. Dealers are also awaiting the Christmas holiday season to see how strong the demand will be in Europe, where lobster is traditional fare at Christmas and New Year's parties.

Bob Bayer, executive director of the Lobster Institute research and education organization, remembers some advice he got 30 years ago from a longtime lobsterman and dealer.

"If the stock market's good, lobster is good. But if the stock market is lousy, then lobsters aren't so good either," Bayer said.