Gas Prices Begin to Dip Below $4 on Oil's Decline

Several weeks after the price of oil began to drop from its all-time record, drivers are finally starting to feel some relief at the pumps.

The current national average for a gallon of unleaded gas is about $4.03, but some stations in around the nation are reporting gas prices have dipped below the $4 mark.

In suburban Chicago, gas could be found for $3.89, prompting drivers to line up at a Speedway in Rosewood, Ill., to take advantage of the deal.

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"I'm trying to fill up before it goes back up again," one driver told MyFOXChicago.

Within Chicago, the average for a gallon of gas was well above the national average at $4.23, according to AAA and Oil Price Information Service.

In Asheville, N.C., the average dipped to $3.98, from Wednesday's $4.00, while in Miami, some stations dropped to $3.97 a gallon, despite an average Thursday of $4.09 a gallon.

Though oil has dipped around $22 a barrel since its all-time high on July 3, prices were slightly higher Thursday after shedding nearly $4 a barrel in the previous day's session on concerns that high fuel prices are dampening demand in the world's biggest energy consumer.

A weekly report by the U.S. Energy Department's Energy Information Administration showed that gasoline demand over the four weeks ended July 18 was 2.4 percent lower than a year earlier — offering further evidence that Americans are cutting back on fuel.

"The worries about demand erosion in the U.S. and an economic slowdown are really pulling prices down," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz Inc. in Singapore.

The Energy Department's report also showed that U.S. gasoline stockpiles jumped 2.9 million barrels last week, far more than analysts surveyed by energy research firm Platts predicted. The decline in crude inventories was less than forecast.

"This is the summer driving season and so there's no question that the data shows demand destruction in the U.S.," Shum said.

Concerns that Hurricane Dolly might affect oil and natural gas output in the Gulf of Mexico dwindled as it made landfall near South Padre Island in Texas on Wednesday. The U.S. Minerals Management Service reported that only about 4.7 percent of production — about 60,000 barrels a day — has been halted because of the storm.

A stronger dollar has added to the pressure on crude prices.

As recently as a week and a half ago, oil seemed on a relentless march toward $150 a barrel. Prices have now fallen in six of the last seven sessions.

"Given that pricing has dropped $20 in two weeks, the question that is on everybody's mind now is whether the oil market has reached a tipping point," Shum said.

"But in the past four-plus years of oil's bull run, the market has seen significant downward corrections before. Each time, the market has come back and moved higher and established new highs."

Despite signs that appetite for oil is continuing to grow in the emerging markets, falling demand in the United States seemed to be the key factor driving prices down.

"We are closer to double-digit crude oil then some may want to admit," said The Schork Report edited by U.S. analyst and trader Stephen Schork.

A threat by Nigeria's main militant group Wednesday to destroy major pipelines in the oil exporting country within 30 days did little to slow crude's decline. The group said in an e-mail statement it had not been part of an alleged $12 million payment to militants to protect pipelines.

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The Associated Press contributed to this report.