With the dollar packing a bigger punch Tuesday, U.S. crude oil futures tumbled more than 4% to settle back below an $80 threshold on the New York Mercantile Exchange at $79.49 per barrel. The November front-month contract expires Wednesday.

Oil prices were primarily pressured by the dollar's revived safe-haven appeal and as cautious investors on Wall Street closed wallets due to China's unexpected tightening of its monetary policy. The surprise increase in interest rates could potentially hamper economic growth on a global scale while also tempering the Far Eastern country's burgeoning demand appetite for oil and other commodities, according to Reuters.

Also paring yesterday's gains with a 4% loss each, the six-month and 12-month strip prices for WTI crude oil slipped to $81.11 per barrel and $82.38 per barrel, respectively, at the close of Tuesday's session. Additionally, November gasoline futures trimmed nearly 5% from Monday's final price tag, lowering back down near a $2 threshold at $2.05 per gallon.

Trading against its oily counterpart, natural gas spot prices at the Henry Hub for November delivery reversed negative momentum on the commodity exchange, notching up 2.4% to settle higher at $3.51 per thousand cubic feet.

Potential 'Stagflation' In The U.S.

Movements in the broader financial markets led by key economic indicators have remained a leading driver in the oil market. When bullish sentiments in the equities market lapse or the dollar strengthens, positive momentum in the oil market tends to reverse to the downside. The idea of further quantitative easing to stimulate economic growth on the domestic front has also played a larger role in rallying oil prices--and market volatility--in recent weeks.

Spotlighting the significance of the bigger macroeconomic picture, Ken Hersh, chief executive, NGP Energy Capital Management, told attendees at the Houston Producers' Forum event at the Houston Petroleum Club Oct. 19 that "(current) cycles are matching up in various ways, whether it be political cycles, capital market cycles or energy cycles."

Hersh revealed that he is worried about the fiscal health of the West, in particular, noting that while economic uncertainty persists in the U.S. and in the EU, emerging international players are beginning to dominate hard assets and capital.

"I think (the global economic situation) is a tale of two halves," Hersh said. On the one hand, emerging powerhouses such as China, Brazil and India are growing at breakneck speeds, with the previous financial crisis merely "a speedbump" in their long-term growth plans, he indicated. Continuing to strengthen while the U.S. and the EU remain in credit limbo, emerging economies "have now begun the process of decoupling from the rest of the world."

"There's a global decoupling going on as the power center shifts from the West (from the developed U.S. and EU) toward the East," Hersh continued. "The U.S. and EU are in a serious round of deleveraging…we've entered a period of increasing regulations, increasing taxes and a very hostile business environment." The post-recession economic picture for the U.S. is "at best anemic and at worst a double dip…regardless of how much quantitative easing there is and how low interest rates are," he contended.

Hersh also underscored that the scenario on the domestic front could potentially become one of "stagflation," in which the U.S. has inflation without significant growth. "All of this liquidity that (Federal Reserve chairman) Bernanke and others are pumping into the system has got to find velocity at some point," he said. "And the question is, will they be able to sop up that liquidity in time to not have the inflation that will come about from the velocity of that money?"

Hersh said he believes it will be "almost impossible."