Tags: Gasoline | Prices | Recovery | economy

Experts: Soaring Gas Prices Threaten to Derail US Economic Recovery

Tuesday, 21 Feb 2012 12:39 PM

Rising gasoline prices are threatening the pace of the fragile U.S. economic recovery, experts warn.

Crude oil prices are surging in part to increased demand globally and to fears of supply disruptions stemming from ongoing Middle East unrest.

Considering that crude oil accounts for 80 percent of the price of gasoline, expect prices at the pump to soar especially in California, where average pump prices for regular gasoline have already surpassed $4.

"It doesn't bode well for the consumer," says Jeff Spring of the Automobile Club of Southern California, according to the Christian Science Monitor. "By April or May, you might see some isolated instances where you're seeing $5" gas per gallon.

When prices rise, consumers buy less gasoline, which often prompts refineries to scale back operations or even close down in some cases. That cuts into supply, which keeps gasoline prices high at a time where the economy can ill-afford to carry the added weight of soaring fuel costs.

"It's a big concern because it's a big chunk of money," says William Dunkelberg, chief economist for the National Federation of Independent Business, a small-business lobbying group, the Christian Science Monitor adds.

For Dunkelberg, every increase by $1 a gallon at the pumps means an extra $20 million out of the pockets of consumers and businesses every day.

"It drains consumer spending when it's already weak," he says.
"And that's not helpful for hiring."

Other experts agree that talk of gasoline approaching $5 a gallon in different parts of the country will threaten the U.S. economy, especially with Europe mired in its ongoing debt crisis and uncertainty.

"Everybody was worried about Europe as being the precipitating factor to sort of throw the world into a slowdown," says Tom Kloza, chief oil analyst at Oil Price Information Service, according to the Chicago Tribune.

"Higher oil prices could do that too."

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