Oil fell sharply Thursday, part of broad sell-off in markets that was triggered by worries about the global economy.
In the U.S., two reports raised concerns about demand for gasoline, which is made from oil. First, more people than expected applied for unemployment benefits last week. And prices for gas, food and clothing rose last month.
If more people are out of work or watching what they spend more closely, they won't drive as much.
Gasoline, on average, cost $3.59 a gallon Thursday. That was down 10 percent from a 2011 high of $3.98 on May 5. Gasoline should fall as low as $3.25 between mid-September and mid-October, if oil stays at current levels, says Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service.
There are other factors lowering the price of gasoline. Motorists tend to drive less in the fall once vacation season ends. Refineries also begin making wintertime versions of gasoline, which are less expensive because they contain fewer additives than summertime blends.
"All of that adds up to weaker prices in September," Kloza says.
Gasoline's low for the year was $3.07 a gallon on Jan. 3.
Benchmark West Texas Intermediate crude for September delivery fell $4.24, or 4.8 percent, to $83.34 per barrel on the New York Mercantile Exchange. Brent crude, used to price many international oil varieties, dropped $2.94 to $107.66 per barrel on the ICE Futures exchange in London.
Prices have swung wildly with every report about the economy. Besides reports about unemployment and prices, a private research group forecast sluggish growth for the rest of the year.
"People are getting spooked," oil trader Stephen Schork says.
That could hurt demand for oil in the U.S., the world's largest consumer of petroleum.
The dollar also rose as the euro and other currencies fell on worries about the health of European banks and the broader regional economy. A stronger dollar pushes down oil prices because oil is priced in dollars and becomes less attractive to investors with foreign currency as the dollar rises.
In other Nymex trading for September contracts, heating oil lost 8.35 cents, or 2.8 percent, to $2.8781 per gallon and gasoline futures dropped 9.44 cents, or 3.3 percent, to $2.7759 per gallon. Natural gas lost 2.1 cents at $3.912 per 1,000 cubic feet.
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