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Analysts: Gas Prices Could Bring Economic Recovery To A Halt

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Just when it looked like people were more willing to spend money again on non-essential items—and on more essential (but deferrable) purchases like new cars—rising prices at the pump could grind some aspects of economic recovery to a halt.

After a major price spike in summer 2008, when prices topped $4 a gallon on a national average, gasoline prices plummeted at the end of 2008 to well under $2 then after a quick rise to about $2.50 have risen only gradually until about a month ago. Prices have risen about 40 cents a gallon over the past month.

Although prices this time aren't expected to spike with the volatility they did in 2008, many analysts haven't ruled out $4 gas this year—especially after political events in the Middle East and North Africa.

According to Nielsen Wire, a 50-cent increase in gas prices would cost the typical U.S. household about $52.50 per month, and if prices were to rise two dollars, that would mean $210 a month, or more than $2,500 a year.

Compounding the situation, Nielsen says, is that commodity prices are also on the rise, pushing profits down and leaving manufacturers and retailers afraid that if prices rise, they'll alienate shoppers. And with wages not keeping pace with inflation either, they will.

Ultimately, this stint of higher gas prices, however long it might last, will result in less eating out, more value-conscious shopping, and the increased use of coupons—along with trip compression.

Will this affect new-car purchases, too? It might be too early to tell, but as we've already reported that it appears to be creating a run on small, fuel-efficient cars, it likely will to some degree. As to whether it will damp an already depressed auto market even further...let's hope not.

[Nielsen Wire]

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Comments (8)
  1. It really is hard to sympathize with car companies, no matter how much they are hurting. If they cant produce cars people want to buy, then they should be going out of business. I am tired of having them make sh*tty cars and then marketing them so that they will sell. If Government Motors cant hack it, then why are we handing them tax payer money?

  2. @Dan
    Now please go back and reread the article.
    Thank you

  3. I've always said to people I know that the best way to get this country back into financial shape is to lower gas prices to under $2 a gallon. Of course that won't happen while we're still dependent on everyone else for our oil. We've got plenty but we're not allowed to use it. Go figure.

  4. Not sure where you live but gas has been over $4 / gal in the California Bay Area for a couple month's now. I recently paid $4.34 a gal for super by the offices where I work ... though the average is $4.20.
    Just goes to show big business doesn't give a $(^*@ about the average American ... most of these oil companies have generated record profits and any time there is even the remotest pretense to raise prices, they do. We don't get any significant amount of our oil from Libya, but man have they milked it.

  5. Our British hearts bleed for you. Try paying over $8 a gallon and then come back and tell us how you feel about feeling ripped off and that it's not "sustainable"

  6. Good ol' Stagflation. This is a bad economic situation.

  7. you think gas is expensive in the states try living anywhere else in the world where it's at least twice as much if not more. how about we grow up and recognize it's a limited commodity that is bad for the economy and bad for our ecosystem. instead of complaining about it's cost we should be looking for alternatives. try riding a bike, guess what, it's free.

  8. I love how you USA people cry about your gas prices.
    Gas has been $7-$8/gallon for years here in Eastern Europe, and our salaries are nowhere near yours.
    Quit whining.

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