Oil Prices Drop Slightly With Government's Debt Challenges

Aug 01, 2011 at 06:36 am by bryan

Oil prices fluctuated last week as the U.S. government failed to compromise on a plan to raise the debt limit and Tropical Storm Don caused refineries to close in the Gulf of Mexico. When no debt agreements were made at the end of the week, the price of oil dropped to settle Friday at $95.70 a barrel on the New York Mercantile Exchange—$4.17 less than the previous week.

News the U.S. economy grew less than expected during the second quarter of the year also pushed oil prices lower. The Commerce Department reported the gross domestic product (GDP) grew at a 1.3 percent annual rate, when it was projected to grow by 1.8 percent.


"While oil prices decreased last week, it's uncertain what will happen this week as the deadline to raise the U.S. debt limit nears," said Jessica Brady, spokesperson, AAA Auto Club South. "If an agreement is made to raise the debt limit, then oil prices will likely rise as a result of the positive news. However, if no agreement is made, the price of oil could drop initially, only to rise again on a weakened U.S. dollar.

“If the government were to default on the country's loans, it would cause the value of the dollar to drop and increase the appeal of crude oil as a commodity. Retail gas prices remained relatively unchanged last week, but consumers should see prices drop slightly this week."

The national average price of unleaded regular gasoline is $3.70 a gallon, 1 cent more than last week. Florida’s average price of $3.71also increased 1 cent from last week. Georgia’s average price of $3.72 decreased a cent, while Tennessee’s average price of $3.57 remains unchanged from last week, respectively. And in Murfreesboro, many discounters are offering regular gas at $3.49 per gallon--some are offering reductions on top of that. 

Sections: News