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Oil drops on questions about Europe's crisis

The Associated Press

The price of oil fell 2 percent Wednesday as protests in Greece and Spain offer visible reminders that Europe is still struggling to resolve its debt crisis.

Benchmark oil fell $1.78 to $89.60 per barrel in New York. The price has fallen nearly $10 in less than 2 weeks.

The protests in Europe are occurring ahead of spending cuts and tax hikes designed to help those countries control debt. Such austerity measures crimp the need for oil and oil byproducts like gasoline and diesel.

Slower growth in Europe also hurts the economies of China and the U.S. Factories in those countries use less oil as they make fewer products for export to Europe.

Oil did get a short-lived bump from the latest report on U.S. supplies. The government said supplies fell last week by 2.4 million barrels. Analysts had expected an increase of 1.5 million barrels. Oil rose back above $90 immediately after the report but then resumed heading lower.

Meanwhile, AAA says the national average price for gasoline fell about half a cent overnight to $3.805 per gallon. That's up about 30 cents from a year ago.

In London, Brent crude fell $1.90 to $108.55 per barrel.