Tags: Moody | Zandi | Gasoline | prices

Moody’s Zandi: Pricey Gasoline Biggest Threat to Recovery

Monday, 26 March 2012 08:23 AM

Rising gasoline prices pose the biggest threat to consumer confidence and the economy in general, says Mark Zandi, chief economist at Moody's Analytics.

Consumer spending accounts for over 70 percent of total U.S. economic output, and if consumers spend less to fill up their cars, the economy suffers.

Rising gas prices are "the most serious immediate threat to consumer confidence and the broader economy," Zandi tells the Los Angeles Times.

Editor's Note: Wall Street Insider Exposes Death of Main Street America

"Even if oil prices stay where they are today, gasoline prices are going to rise to a new record high in late April or early May," Zandi adds.

"That takes a real bite out of household pocketbooks."

Tensions in the Middle East have pushed crude prices high, sending gasoline prices up with them.

Western nations and Israel are working to sanction Iran for its nuclear ambitions.

A European embargo on Iranian crude will take effect on July 1, but Iran has said it has already halted some shipments to the U.K. and France.

U.S. gasoline prices are due to rise anyway as the spring and summer approach, when more Americans drive and refineries switch to more expensive seasonal inputs.

The price of a gallon of gasoline in the United States rose 11.49 cents over the past two weeks as profit margins for refiners and gasoline retailers increased, according to the nationwide Lundberg Survey.

The national average for a gallon of regular gasoline rose to $3.9297 on March 23, the survey of about 2,500 gasoline retailers in the continental United States found, Reuters reported. That was a smaller increase than the 12.31-cent rise in the previous survey, which covered the two weeks that ended March 9.

On a positive note, the U.S. economy is stronger this year than in the recent past, and can absorb rising gasoline prices, other experts say.

"It's a head wind for the consumer, but it doesn't derail the recovery. It can be taken in stride, especially if the underlying fundamentals of the economy are improving, which they are," says Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, a non-profit research group that publishes the closely watched Consumer Confidence Index.

Iranian crude exports have already begun falling due to sanctions, which is further pressuring crude oil up higher.

Editor's Note: Wall Street Insider Exposes Death of Main Street America

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Monday, 26 March 2012 08:23 AM
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