Rising Gas Prices Could Hamper Recovering Economy
Gasoline prices have never been higher at this time of the year.
At $3.53 a gallon nationally, prices are already up 25 cents since Jan. 1. And experts say they could reach a record $4.25 a gallon by late April.
“You’re going to see a lot more ‘staycations’ this year,” says Michael Lynch, president of Strategic Energy & Economic Research. “When the price gets anywhere near $4, you really see people react.”
Higher gas prices could hurt consumer spending and curtail recent improvement in the U.S. economy.
A 25-cent jump in gasoline prices, if sustained over a year, would cost the economy about $35 billion. That’s only 0.2 percent of the total U.S. economy, but economists say it’s a meaningful amount, especially at a time when growth is only so-so. The economy grew 2.8 percent in the fourth quarter, a rate considered modest following a recession.
High oil and gasoline prices now set the stage for even sharper increases at the pump because gasoline typically rises in March and April.