Oil prices fell on Monday, just eight days before the U.S. arrives at the “fiscal cliff” deadline without a budget agreement in place.

If no deal is reached by Jan. 1, steep tax increases and government spending cuts will automatically take effect that will jar the U.S. economy and potentially throw it into recession, economists have warned.

Benchmark oil for February delivery fell 10 cents to $88.56 per barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell $1.47 Friday to finish at $88.66 per barrel in New York, the contract’s lowest point in three weeks. It dropped to $87.96 per barrel at one point Friday.

Oil prices tend to drop when a major world economy is threatened by a downturn, which more often than not leads to reduced demand for energy.

It was little more than a week ago when news emerged that President Barack Obama and House Speaker John Boehner had significantly narrowed their differences and appeared within striking distance of an agreement. Since then, however, negotiations have stalled with Obama and Congress on a short holiday break.

In other energy futures trading on the New York Mercantile Exchange- Natural gas lost 2.7 cents to $3.424 per 1,000 cubic feet. Heating oil fell marginally to $3.0086 a gallon. Wholesale gasoline fell 1.2 cents to $2.7035 a gallon.

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