NEW YORK - Oil prices fell sharply yesterday, dropping below $124 a barrel as demand concerns grew and Federal Reserve Chairman Ben S. Bernanke indicated that more interest-rate cuts are unlikely. Bernanke's comments sent the dollar higher and raised questions about oil's ability to reach new highs in the short term.

Light, sweet crude for July delivery fell $3.45 to settle at $124.31 a barrel on the New York Mercantile Exchange. Prices dipped as low as $123.87 in after-hours electronic trading. It was oil's lowest trading and settlement levels since May 15.

Prices peaked at $135.09 on May 22; its settlement yesterday was $10.78, or 8 percent, below that record.

Retail gasoline prices, meanwhile, rose slightly to a record near $3.98 a gallon, but could fall if oil prices continue to decline.

The latest MasterCard SpendingPulse survey found that demand for gasoline fell 4.7 percent last week - which included the long Memorial Day holiday weekend - compared with the same week last year.

That dovetails with recent data from the Energy Department and Federal Highway Administration, as well as several other surveys suggesting high prices are cutting America's appetite for fuel. A new survey by RBC Capital Markets Corp. finds about 90 percent of Americans have made changes in their daily lives to counter high energy prices, including driving less and taking public transportation more often.