Oil prices fall to lowest levels of the year so far; pump prices slowly drop

Oil drops again, now down 20 pct in just 2 weeks

Oil prices fell again Monday and have now fallen about 20 percent in just two weeks as investors worry about the ripple effects of a debt crisis in Europe.

Oil fell below $70 Monday, reaching a low of $69.27 before rebounding slightly. There is fear in the market that economic weakness in Europe could spread to the U.S. and hurt the global recovery and therefore demand for oil. The turnaround has been sudden — oil hit an 18-month high of $87.15 a barrel during trading on May 3.

The plunge in oil extended to the New York Stock Exchange, where shares of major energy companies were lower.

Oil’s decline holds good news for motorists, who should see sharply reduced prices at the pump. The cost of a gallon of gas has fallen just 2 percent nationwide since peaking earlier this month at $2.929 per gallon. But that pace should pick up heading into the Memorial Day weekend and the summer driving season.

Prices in many markets in the U.S. will be $2.75 per gallon or lower by next week, said Tom Kloza of the Oil Price Information Service.

Kloza said the only losers from lower crude prices will be oil producers, but they still will make plenty of money at current prices.

Gasoline prices fell 0.5 cents overnight to a national average of $2.867 per gallon, according to auto club AAA, Wright Express and OPIS. Prices have dropped 4.1 cents in the past week and 6.2 cents since peaking May 6 at their highest point since October 2008. Price remain 55.9 cents higher than a year ago, but the gap is narrowing.

The Energy Information Administration will release its weekly survey of gasoline prices later Monday.

Oil prices have tumbled in the past two weeks on the European debt crisis and as supplies of oil continue to grow. The debt crisis has weakened the euro, which hit a four-year low against the dollar Monday.

Because oil is priced in dollars, it becomes more expensive for investors holding other currencies.

On Monday, benchmark crude for June delivery dropped $1.45 to $70.16 a barrel on the New York Mercantile Exchange. Earlier it fell below $70 for the first time in three months. That follows a plunge in the June contract of $2.79, almost 4 percent, to $71.61 on Friday.

Oil stocks fell on they NYSE. Exxon Mobil dropped about 1 percent, while shares of BP, which is trying to stop an oil spill in the Gulf of Mexico, and Royal Dutch Shell fell close to 2 percent.

The oil spill in the Gulf of Mexico has done nothing to slow the drop in crude prices and, so far, has not interfered with tankers carrying imported crude to Gulf ports or those taking refined products from there to other parts of the country. There is concern though that the spill could eventually slow shipments if vessels must be scrubbed of oil before they reach port.

In other Nymex trading in June contracts, heating oil fell 6.49 cents to $1.9957 a gallon, and gasoline fell 8.19 cents to $2.047 a gallon. Natural gas rose 2.7 cents to $4.340 per 1,000 cubic feet.

In London, Brent crude advanced 3 cents to $77.96 on the ICE futures exchange.

Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.