On Thursday, oil prices in the US witnessed a drop because of the market's apparent fears about the country's `fiscal cliff' crisis which is threatening to pull the economy back to recession for the biggest crude oil consumer in the world.

The drop in the oil prices was evident from the fact that, after shedding 88 cents from the Wednesday prices, New York's main contract, West Texas Intermediate (WTI) for January delivery, finally settled at $85.89 per barrel on Thursday. In London trade, Brent North Sea crude for January witnessed a $1.59 drop to close at $107.91.

Meanwhile, among the other energy futures trading on New York Mercantile Exchange, heating oil recorded a 2-cent drop to end at $2.94 per gallon; while wholesale gasoline and natural gas fell 4 cents each, to respectively end at $2.60 per gallon and $$3.35 per 1,000 cubic feet.

With the prices at the pump also continuing their decline, the average gas price across the US fell by over one penny overnight to $3.30 per gallon; marking the lowest average price since July 3.

With doubts mounting over the political leaders' ability to work out an agreement in budget negotiations, there are concerns galore that the so-called `fiscal cliff' - underscoring significant tax increases and government spending cuts which will become effective automatically, if the leaders cannot strike a deal - could throw the US economy back into recession, and likely deliver a blow to demand for energy.