Oil prices drop, set to bring some relief at pump

Oil prices fell this week, and it is expected to result in relief at the pump for consumers.

The price of U.S. crude oil has fallen significantly over the past several days, falling from as high as $94 per barrel last week down to about $90 earlier this week. 

Prices dropped for a second time this week and sat at about $83 per barrel as of early Friday afternoon.

The downward shift is already starting to show up at the gas pump; the U.S. price average was about $3.75 per gallon Friday, down from $3.83 a week ago.

Andrew Lipow, president of consulting firm Lipow Oil Associates, said he expects the average gasoline price to drop to about $3.50 per gallon in the next two weeks and fall further after that.

“Prices at the pump are falling and will continue to do so,” Lipow said.

He said that in addition to the drop in oil prices, the seasonal summer season is over and the U.S. has high inventories of gasoline — about 10 percent higher than this time last year — because the industry hasn’t seen hurricane impacts.

As for the drop in oil prices, Lipow cited high interest rates, which could lead to economic slowdown.

“When we see these higher interest rates and they percolate through the economy in the form of higher interest rates on mortgages and car loans and credit cards — and at a time when we still have a significant amount of inflation — the consumer’s budget gets stretched and they have to start cutting somewhere, which is their spending,” Lipow said. 

“That has a direct impact on economic growth and consequently oil demand,” he said, adding that consumers “go out less, they buy less stuff … they order in less. And when we think about the oil market, diesel is a fuel by which the consumers receives all these goods and services to their homes.”

AAA similarly cited economic concerns for the drop in oil prices.

"Oil prices fell sharply yesterday due to rising market concern that if interest rates continue to increase, the economy could tip into a recession," the organization said Thursday in a press release.

AAA spokesperson Andrew Gross noted in the statement that at least one state has sites selling gasoline at less than $3 per gallon and added "we should begin to see more states join in over the next few weeks."