by Calculated Risk on 6/04/2012 09:09:00 AM

Oil prices have fallen sharply. West Texas Intermediate (WTI) futures are down to $82.36, and Brent is down to $96.93 per barrel.

Note on Europe: There are two main channels that could impact the U.S. economy: trade, and financial spillover / credit tightening. The impact on trade will probably be minimal, even as the euro falls sharply against the dollar, because a small percentage of U.S. GDP is from exports to Europe - and some of decline in trade will be offset by lower oil prices (and lower US interest rates). The financial channel is much more of an unknown, and that is the significant downside risk.

From the Indystar.com: Gasoline prices expected to continue to fall in Indiana, analyst says

“With significant downward pressure on oil last week, motorists will continue to see prices sliding east of the Rockies, and even the West Coast will start to get in on the action, thanks to a supply situation that appears to be turning around.”

Average retail gas prices in Indianapolis have dropped by 17 cents a gallon last week, averaging $3.53 Sunday and $3.52 this morning. That’s about 40 cents lower than last month and about half a dollar cheaper than last year, according to Gasbuddy.com.

The following graph shows the decline in gasoline prices. Gasoline prices are down significantly from the peak in early April, and should fall further following the steep decline in oil prices last week. Gasoline prices in the west have been impacted by refinery issues, but prices are now falling there too.

Note: The graph shows oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com