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The price of crude oil slid to its lowest level in three months Monday, leaving energy experts scurrying for explanations that ranged from the altered tack of tropical storm Edouard in the Gulf of Mexico, to Barack Obama's tentative support for offshore drilling, to a weaker-than-expected U.S. spending report.

Light, sweet crude for September delivery fell $3.69 (U.S.) or 2.9 per cent to $121.41 a barrel on the New York Mercantile Exchange, just three weeks after touching a record of $147.27.

Analysts and traders, who have been whipsawed by volatility in the crude markets, were also quick to finger technical selling by large investors and higher production numbers from OPEC as culprits for the drop.

Yet this fixation on oil's daily fluctuations threatens to obscure a larger question: Now that crude prices have plunged from their record highs, dragging gasoline prices down with them, will the economy get the much-needed boost it craves?

“In many ways we're just too fixated on the near-term gyrations, which are impossible to explain,” said Peter Tertzakian, chief energy economist at ARC Financial in Calgary.

“There's no question there's been a price response – it's just, what is the permanence of that price response?”

So far, even with the significant price reductions, wary consumers don't appear ready to rush back to the gas pumps en masse, much less to renew their love affair with trucks and SUVs.

According to a report Monday by the U.S. Commerce Department, inflation-adjusted consumer spending dropped in June.

David Hobbs, director of global research with Cambridge Energy Research Associates in Massachusetts, said there is a lag effect, and that it will take some time – and likely further erosion of prices – before people forget the recent pain of $150 oil.

“The pullback does not seem to have been sufficient yet to cause people to change a lot of their expectations as to what the future will hold,” he said. “A good bellwether is how seriously policy makers are taking this issue, and that does not seem to have diminished.”

There is growing speculation within the oil industry that prices could slip to the $100 mark over the next 12 months because of slowing global economic conditions. Mr. Tertzakian estimates that consumers won't likely change their driving habits or their consumption of energy products unless oil reaches $110 a barrel, which would imply gas prices of approximately $3.50 a gallon. Yet he also believes there is a danger lurking here, that a sudden binge will merely cause another price spike, creating a vicious circle.

“If oil prices drop, you're going to see the industrialization in developing countries rev up,” he predicted. “I'd almost say it will go back to $140, but the question is when. In the broader picture, it's really important to recognize that the softening in demand is the result of the business cycle.”

Although record oil prices have created financial hardship for some, they have also produced benefits, observers say. More people are using public transportation or car pooling. Purchases of gas-guzzling trucks and SUVs have plunged. Increasingly, politicians and lawmakers are preaching the gospel of conservation, and looking for ways to curb oil addiction through alternative sources of energy. Mr. Obama Monday called on the government to tap its oil reserves and softened his opposition to offshore drilling.

The issue is that the pendulum has only begun to swing in favour of reduced oil dependence, and some fear that a steep drop in oil prices could blunt the momentum.

“Unfortunately, if we fall another 40 or 50 cents [on gas prices], I'm afraid a lot of the progress we've made this year could possibly be [reversed],” said Jim Ritterbusch, president of Illinois-based Ritterbusch and Associates, an oil trading advisory firm. “We want gasoline prices to go lower, but we don't want them to go down too far or too fast.”