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Oil prices down $10 a barrel could lead to cheaper gas at the pump

The price of oil and the broader stock market overall declined Friday given fears of a new coronavirus variant.
Credit: AP
FILE - In this June 26, 2019, file photo, a man adds fuel to his vehicle at a gas station in Orlando, Fla. A coalition of states is suing the Trump administration for the second time to block a planned reduction in penalties automakers pay when they fail to meet fuel economy standards. Twelve states and the District of Columbia sued the administration Friday, Aug. 2, 2019, for replacing an Obama-era regulation that imposed a penalty of $14 for every tenth of a mile-per-gallon that an automaker falls below the standards. (AP Photo/John Raoux, File)

ST. PETERSBURG, Fla. — Oil prices fell more than $10 a barrel on Friday amid concerns of a new COVID-19 variant, since named omicron by the World Health Organization.

The drop — the largest one-day decrease since April 2020, according to Reuters — could lead to lower gas prices at the pump in the coming weeks, GasBuddy petroleum analyst Patrick De Haan told followers on Twitter. Already, the crowd-sourced fuel tracking site shows the national average for a gallon of gas trending lower.

"The impact will likely be pretty swift, that is, the national average will likely, eventually, decline under $3 a gallon so long as today's drop holds on," DeHaan said.

Declining oil prices were part of a larger trend Friday on Wall Street as stocks fell sharply. The detection of a new variant provided added to investor uncertainty about potentially reversing months of progress of getting the pandemic under control, The Associated Press reported.

The U.S. announced that it will ban travel from South Africa and seven other African nations by non-citizens starting Monday as a potential way of preventing further spread. Still, scientists say there remains a lot of questions about the variant, such as whether it is more infections or deadly, and if current vaccines are effective.

It's believed new travel bans and potential lockdowns will result in an oversupply of oil, leading to falling prices.

"This [the sell-off] is attributable to concerns about a sizeable oversupply in early 2022 that is set to be brought about by the upcoming release of strategic oil reserves in the US and other major consumer countries, plus the ongoing steep rise in new coronavirus cases," noted analysts at Commerzbank, according to CNBC.

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