NEW YORK — Oil slipped more than 2 percent yesterday after Standard & Poor’s lowered its long-term outlook for US debt, raising concerns about the economy and expectations of cuts in government spending.
Another move by China to slow its booming economy also helped push prices down.
Benchmark West Texas Intermediate crude fell $2.54, or 2.3 percent, to settle at $107.12 per barrel on the New York Mercantile Exchange.
Gasoline pump prices climbed to a national average of $3.83 per gallon, according to AAA and others. A gallon of regular has increased 29.1 cents in the last month and 96.8 cents from a year ago.
Pump prices are above $4 per gallon in California, New York, Illinois, Connecticut, Washington, D.C., Hawaii, and Alaska.
Economists are watching for signs that high fuel prices are taking a toll on the economy. Surveys suggest drivers are cutting back on gasoline purchases. The combination of stagnant wages and rising food and energy costs has prompted some economists to lower their growth estimates for the economy in the first quarter by half.
A surprise decision by Standard & Poor’s Ratings Service to lower its long-term outlook for US debt to “negative’’ from “stable’’ made a drop in energy consumption more likely, analysts said. The United States is facing a record $1.5 trillion deficit this year, and lawmakers are looking for ways to trim the huge debt.
“If the U.S. doesn’t get its budget under control, we’ll need to raise interest rates,’’ said Phil Flynn, an energy analyst with PFGBest. Higher interest rates will make it tougher for consumers and businesses to raise money, dampening energy demand.
Oil fell following China’s announcement over the weekend that it would raise bank reserve requirements for the fourth time this year in an attempt to get inflation under control. The move is expected to hurt demand for energy by making it harder for consumers and businesses to raise money.
The price of oil was also undercut by comments from OPEC officials who said the market is oversupplied with crude.