May 28 (Bloomberg) -- Crude oil fell to a one-week low on signs that record U.S. gasoline prices will cut fuel consumption during the summer driving season.

Gasoline pump prices reached an all-time high yesterday, curbing demand at the start of the summer, when the country's fuel use typically peaks. Higher prices and a housing slump helped push U.S. consumer confidence to the lowest level since October 1992, a report showed yesterday.

``The words `demand destruction' are on everyone's lips,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``It's quite apparent that demand in the U.S. has been impacted by high prices. Emerging markets are now coming under greater scrutiny.''

Crude oil for July delivery fell $1.55, or 1.2 percent, to $127.30 a barrel at 9:15 a.m. on the New York Mercantile Exchange. Futures reached $135.09 on May 22, the highest since trading began in 1983. Prices have doubled over the past year.

Brent crude oil for July settlement declined 94 cents, or 0.7 percent, to $127.37 a barrel on London's ICE Futures Europe exchange. The contract touched a record $135.14 on May 22.

Indonesia, Taiwan, Sri Lanka and Pakistan have decided to raise fuel prices as the cost of subsidies mounts, and Malaysia plans to announce a revision to its subsidies on May 30. India's Oil Secretary M.S. Srinivasan said higher domestic gasoline and diesel prices are inevitable because of rising global prices.

``At least a half dozen emerging markets have cut subsidies or have plans to do so,'' Barakat said. ``Price rises will kill demand in these countries.''

The price of regular gasoline at U.S. pumps, averaged nationwide, rose 0.7 cent to an all-time high of $3.944 a gallon, AAA said today on its Web site.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: May 28, 2008 09:34 EDT