“The market’s expectations have changed very rapidly and unexpectedly,” said Edward Morse, the chief energy economist at Lehman Brothers. “The market went out of control on the upside. But market participants realized there was much more demand destruction than had been thought even a month ago, that inventories are building up quickly, and that, in fact, more supplies are coming onto the market.”  As a result of looser market fundamentals, many analysts believe energy prices could keep falling through the end of the year. The president of the OPEC oil cartel, Chakib Khelil, said Tuesday that oil might drop as low as $70 a barrel.  Whether that actually happens will depend on the course of the American economy and its impact on the rest of the world. How long will the American slowdown last and what effect will it have on emerging markets like China, which have accounted for the bulk of the growth in oil demand?  Many experts warn that a hurricane hitting the oil-producing region of the Gulf Coast or renewed tensions in the Persian Gulf could easily push prices back up again, quickly.  Only a few weeks ago, Israel conducted war games and Iran tested new missiles, renewing fears of a flare-up in the Middle East, and pushing oil prices to a record of $145.29 a barrel. The recent shift in American policy regarding Iran, with an emphasis on diplomacy, helped deflate some of the geopolitical risk premium that had been built into oil prices.  “The one piece of good news we’ve had recently has been the drop in oil prices,” said Bernard Baumohl, the chief global economist at the Economic Outlook Group. “But there is nothing that tells us with any certainty that this decline can be sustained. Just as abruptly as they have fallen, oil prices can rebound because of geopolitical factors.”  Gasoline peaked at a nationwide average of $4.11 a gallon on July 17. Since then, retail gasoline prices have been falling briskly, to a nationwide average of $3.94 on Tuesday, according to AAA, the automobile group. Still, that is $1.05 a gallon higher than at the same time last year, when gasoline sold for $2.89 a gallon.  Natural gas settled at $9.22 a thousand cubic feet on Tuesday, down from a high of about $13.58 at the beginning of the month, as a cooler-than-expected summer helped curb the use of gas to generate electricity. That has led to a build-up of commercial inventories.  The drop in oil prices has come as gasoline demand in the United States fell sharply in recent months, thanks to Americans cutting back on their driving. Gasoline consumption fell 3.6 percent in the week ending July 18, compared with the year-earlier period, according to the Energy Department. Americans drove 9.6 billion fewer miles in May compared with the same period last year, a 3.7 percent decline and the biggest-ever drop at that time of year, the Transportation Department said on Monday.  “People are waking up to the fact that prices have an impact on demand and that what happens in the U.S. gasoline market has a worldwide impact,” said Daniel Yergin, the chairman of Cambridge Energy Research Associates, a consulting firm. The United States is the world’s largest oil consumer, and its gas market alone is bigger than the entire Chinese oil market, he said.  “As a result of the economic slowdown and high prices, we’ve probably seen the peak in American gasoline demand, at least for some years,” he said.  Americans remain unhappy about the state of the economy. But consumer confidence rose slightly this month compared with last, according to a report released on Tuesday by the Conference Board, a private research group. That was mainly because of the declining gasoline prices, said Ian Shepherdson, the chief United States economist at High Frequency Economics.  One big question is what will happen to Chinese oil demand.  China has been the biggest driver of global energy demand in recent years, experts said. From 2000 to 2007, China’s energy demand grew by 65 percent, contributing to a 12 percent jump in global oil demand. In that period, China accounted for a third of the total increase in oil consumption around the world.  This year, Chinese oil demand is expected to grow by 5.6 percent, thanks mostly to increases in gasoline and diesel consumption. This growth would account for nearly half of the rise in oil consumption worldwide, which is expected to reach nearly 900,000 barrels a day, according to the International Energy Agency.  But that too may be changing, some economists said.  “We have seen the economies of emerging countries, like China, India, and Brazil begin to slow down,” Mr. Baumohl said. “That should begin to soften the price of oil.”  A version of this article appears in print on , on Page A1 of the New York edition with the headline: Bright Sliver in Grim Economy As Energy Prices Take a Break. Order Reprints| Today's Paper|Subscribe
Oil has dropped more than $23 a barrel, or 16 percent, and gasoline prices have fallen as Americans drive less.