Gas prices over $4 per gallon are displayed at a Shell station in San Mateo, Calif., on March 13, 2008.
Gas prices over $4 per gallon are displayed at a Shell station in San Mateo, Calif., on March 13, 2008. - 
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Kai Ryssdal: So the proximate cause... that oil thing I mentioned: Crude prices have been slip sliding away since Memorial Day.

As of today, it's down almost 10 percent from its high of $135 a barrel. The close in New York today was $122.30 thanks to new signs that demand both here and abroad is slowing.

From Washington, Marketplace's John Dimsdale reports.

John Dimsdale: The Energy Department says Americans bought less gasoline last week and inventories jumped much more than analysts expected. Also, some rapidly developing countries like Malaysia and Indonesia announced they can no longer afford to subsidize the price of gasoline their citizens buy.

James Cordier, the president of, says that's beginning to convince traders that global demand for oil will slack off.

James Cordier: The psychology is not nearly as bullish just in the last several days as it was two weeks ago. That should make prices plateau and as we get into July and then August, we should see a substantial decline in gasoline prices. We could see gas prices back down to $3.50 to $3.60 in the third quarter of the year.

Cordier says traders are also beginning to think the Federal Reserve is serious about supporting a stronger dollar. That makes oil, priced in dollars, more expensive around the world.

But Tom Wallin at the Energy Intelligence Group says there's still heavy demand for oil, so don't get too used to falling prices.

Tom Wallin: People need to be aware that this remains a fairly tight market that's vulnerable to the next hurricane disruption of production and refining or a revolution in a oil producing country or war or what have you.

And most retail forecasters are predicting average gasoline prices nationwide will easily top $4 a gallon for most of the summer vacation season.

In Washington, I'm John Dimsdale for Marketplace.