Oil price's decline implies another dime drop at the pump

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By staff and wire reports

Oil prices closed at their lowest level in nearly three months Monday, plunging after Tropical Storm Edouard appeared unlikely to threaten oil and natural gas facilities in the Gulf of Mexico.

Crude's steep drop — prices fell more than $5 at one point during the day — dragged down other commodities from corn to copper and matched the big nosedives of the past three weeks, adding to growing beliefs that the oil bubble is at least temporarily deflating.

   ``What this means is that we're going to see some more relief at the pump. We're probably looking at another 10 cents of downside in retail gas prices,'' said Tom Kloza, publisher and chief analyst at Oil Price Information Service in Wall, N.J. A gallon of regular gas fell on average about half a penny overnight to a national average of $3.881.

[+]Enlarge

Lincoln Gas Prices

average, regular-grade

Monday: $3.787

Sunday: $3.794

Month ago: $4.059

Year ago: $2.957

Source: AAA Fuel Gauge

Also weighing on prices was a report by the Commerce Department that consumer spending fell in June as shoppers dealt with higher prices for gasoline, food and other items. That fed investors’ beliefs that a U.S. economic slowdown is forcing Americans to cut back on energy use.

Light, sweet crude for September delivery fell $3.69, or 2.9 percent, to settle at $121.41 a barrel on the New York Mercantile Exchange. It was crude’s lowest settlement price since May 5. Earlier, prices plummeted more than $5 to $119.50, the lowest level since May 6.

Crude has now fallen in six of the last nine sessions and has shaved 18 percent off its trading record of $147.27 reached July 11.

Natural gas futures also fell sharply, dropping 70.9 cents, or 7.55 percent, to $8.68 per 1,000 cubic feet. And gasoline futures fell 8.43 cents, or 2.73 percent, to $3 a gallon.

The dramatic dive in oil came shortly after traders learned that Edouard, aiming for the coasts of Texas and Louisiana, likely would not damage offshore oil and natural gas drilling platforms that sit in the storm’s path.

Meanwhile, retail gas prices kept falling, reflecting the continuing price-driven drop in U.S. fuel demand.

Gasoline has fallen almost 6 percent since hitting an-all time high above $4 a gallon on July 17, but so far hasn’t kept up with oil’s steep descent, suggesting struggling filling stations are still saddled with gas bought when crude prices were higher.