07/23/2012 07:49 EDT | Updated 09/22/2012 05:12 EDT

Heightened concerns about Europe push down oil prices by almost 4 per cent

NEW YORK, N.Y. - The price of oil fell Monday as concerns increased about Europe's debt-ridden economies.

Borrowing costs soared for Spain and Italy, reaching levels considered unsustainable for more than a few months. Spain and some other eurozone nations already are in recession, and many analysts worry that other European nations will follow.

As Europe struggles, its demand for manufactured goods from the U.S. and China will likely decline. China, the world's second biggest oil consumer behind the U.S., already foresees slower economic growth in the third quarter. And the U.S. economy is still sluggish. Less growth means less demand for oil.

Benchmark U.S. crude prices fell by US$3.69, or 4 per cent, to finish the day at $88.14 per barrel in New York. Brent crude, which sets the price for imported oil, lost $3.57, or 3.3 per cent, to finish at $103.26 per barrel in London.

Stocks also fell with major indexes closing down about 1 per cent.

At the pump, gasoline prices rose by 2.4 cents over the weekend to a national average of $3.471 per gallon, according to AAA, Wright Express and Oil Price Information Service. The price of a gallon of regular increased in July by an average of 14 cents, but it's still 46 cents cheaper than the peak for the year in April.

Gasoline prices may rise this week following a fire at a Louisiana refinery that forced owner Valero Energy Corp. to shut it down. Valero spokesman Bill Day said the Meraux, La., refinery was taken offline after catching fire early Sunday morning. It will stay shut while the company repairs the damage. No injuries were reported.

The Meraux facility can refine up to 135,000 barrels of oil per day. It then ships gasoline and other refined petroleum products to other parts of the country, including the East Coast. An extended closure at Meraux could tighten gasoline supplies in some parts of the country.

In other futures trading, heating oil fell by 10.54 cents, or 3.6 per cent, to finish at $2.8189 per gallon, while wholesale gasoline lost 6 cents, or 2 per cent, to end at $2.8829 per gallon. Natural gas rose 3.6 cents to end at $3.1170 per 1,000 cubic feet.