Drop in oil prices to show at pump

NEW YORK -- Prices at the pump pulled back from record highs Friday as another slide in oil capped crude's biggest one-week drop in more than three years.

Gasoline dropped by nearly a penny at filling stations across the country. If crude prices hold at current levels or head lower, drivers may see further relief at the pump in the coming days.

Is it time to declare the energy bubble over? Experts aren't ready to go that far just yet. Oil has bounced back repeatedly from big drops, and oil prices continued to set record highs this year.

But sentiments are shifting. Experts who just days ago thought the market's meteoric run still had legs are growing cautious. Some say last Friday's high above $147 a barrel may be the last record the market sees -- for now.

"If this is not the bubble's implosion, then it's a reasonable facsimile," analyst and trader Stephen Schork said in his daily market commentary. "Perhaps all we have witnessed was a replay of last August's subprime-induced sell-off. Time will tell. Nevertheless, for the time being we no longer care to hold a bullish view."

Oil's drop may have an immediate effect, as gas station owners desperate to get drivers back to the pump consider a pre-emptive cut in price.

The price for a gallon of regular fell to $4.105, down nearly a penny, according to AAA. Diesel prices also eased, dipping three-tenths of a cent to $4.842 a gallon.

Light, sweet crude for August delivery fell 41 cents to settle at $128.88 a barrel on the New York Mercantile Exchange.

That wasn't much of a surprise, considering that a barrel of oil is now more than 10 percent cheaper than it was at the start of the week. Perhaps more stunning is the market's inability to spark a larger rally.

But consumers have been jolted repeatedly by unheard-of gas prices, and immense changes in how consumers live are already in motion.

Car buyers have been fleeing to more fuel-efficient models. U.S. sales of pickups and sport utility vehicles are down nearly 18 percent this year through June, while sales of small cars are up more than 10 percent.

While slashing production of more-profitable trucks and sport utility vehicles, automakers have been scurrying to build their most fuel-efficient models faster. Toyota Motor, which hasn't been able to keep up with demand for its 46 mpg Prius hybrid, said last week that it will start producing the Prius in the United States and suspend truck and SUV production to meet changing consumer demands.

Ford Motor Co. and General Motors also have announced plans to increase small-car production.

A need for caution

Many oil traders buy and sell energy futures based on technical indicators that attempt to determine whether prices have support at various value levels. From that point of view, NYMEX futures are "getting into deeper trouble," said analyst Olivier Jakob of Petromatrix in Switzerland.

"Buying here is an opportunity if you are a deep believer in $200 [a barrel]; otherwise we think that caution would be better applied," Jakob said in a research note.

If oil buyers sense that the slide was overdone, the impact will be felt almost immediately by everyone.

"If [oil prices] rebound, you're going to see a quick reaction at the gas station, because their profit margins are so stretched," Sundstrom said.