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Oil drops 4%; gas could get cheaper; Weakening economy cited as reason

There's some good news behind the discouraging headlines on the economy: Gas is getting cheaper. It's dropped to $2.99 in some areas of South Carolina and could soon fall below $3 in a handful of Southern states.

A plunge in oil prices has knocked more than 30 cents off the price of a gallon of gas in most parts of the U.S. since early April. The national average is now $3.61. Experts say it could drop to at least $3.40 before Labor Day.

In the Buffalo Niagra region, a gallon of regular averaged $3.90 on Friday, down 18 cents from a month ago.

If Americans spend less filling their tanks, they'll have more money for discretionary purchases. The downside? Lower oil and gas prices are symptoms of weakening economic conditions in the U.S. and around the globe.

On Friday, oil plunged nearly 4 percent as a bleak report on U.S. job growth heightened worries about a slowing global economy and waning oil demand. Sobering economic news from China and Europe also contributed to the drop.

West Texas Intermediate, the benchmark for oil in the U.S, fell $3.30, or 3.7 percent, to $83.23 per barrel, the lowest price since early October. The drop adds to a 17 percent decline in May. Brent crude, which is used to price international oil, lost $3.44, or 3.4 percent, to $98.43 per barrel, its lowest price since January 2011.

That means some relief at the pump for U.S. drivers, even if they're worried about jobs. Auto club AAA says pump prices fell nearly 5 percent in May, the largest monthly percentage drop since November last year.

Dan Durbin, president of R.L. Jordan Oil Co., says low wholesale prices allowed seven of the company's Hot Spot stations in Spartanburg, S.C., to lower the price to $2.99 per gallon Friday. That's a gift for drivers, with the summer driving season just getting started.

Durbin predicted that more of his stations and some competitors will lower prices once they sell off higher-priced supplies currently in their tanks. South Carolina was the first state to have prices fall below $3 a gallon because it has the lowest gas tax in the nation.

Patrick DeHaan of Gas Buddy expects prices to soon fall below $3 a gallon in Tennessee, Alabama, Mississippi, Oklahoma and Missouri. Those states already have low gas prices and are located near major infrastructure such as refining hubs.

While lower gas prices will help consumers' budgets, it's questionable how much they'll boost overall confidence.

"If you don't have a job, it doesn't matter if gasoline prices are $5 or $2 a gallon," said Phil Flynn, an analyst for The Price Futures Group.