Oil prices plummet more than $6 amid economic fear

Light, sweet crude plunged $6.44, or 4.4 percent, to settle at $138.74 a barrel in an extremely volatile session. Prices at one point plummeted more than $10 from the day's high.

Mounting concerns about the risks inflation poses to the United States, the world's biggest oil consumer, helped spark the declines. Analysts also attributed the sell-off to Thursday's expiration of options contracts, which tend to increase volatility, and to computers programed to automatically sell once prices reach certain thresholds.

"There was this big ... selling pressure when prices dipped below $140 a barrel. It got a lot of bulls very nervous," said Tom Kloza, chief oil analyst at the Oil Price Information Service. "If it was a fire, you'd call it an accelerant."

The drop, which eclipsed last Tuesday's slide of $5.33, marked the biggest decline in dollar terms since the Gulf War. Even so, prices remain no lower than they were a week ago.

Longtime market observers cautioned that the turnaround may not signal a lasting shift in sentiment--prices have swung violently in recent days as they flirted with record highs. But it does underscore investor uncertainty about the sustainability of sky-high prices and their potentially long-lasting effects on the broader economy.

Over the course of the day, the contract rose as high as $146.73 and fell as low as $135.92. Prices hit a record $147.27 Friday.

Concerns about the economy were high on traders' minds Tuesday.

Federal Reserve Chairman Ben Bernanke told Congress that "numerous difficulties" are racking the U.S. economy, and warned that rising prices for energy and food are elevating the risks of inflation.

At the same time, the Labor Department reported that wholesale inflation jumped by 1.8 percent last month, a larger-than-expected gain. Over the past year, wholesale prices have risen 9.2 percent, the most since 1981.