Washington Just when companies have finally stepped up hiring, rising oil prices are threatening to halt the U.S. economy’s gains.
Some economists are scaling back their estimates for growth this year, in part because flat wages have left households struggling to pay higher gasoline prices.
Oil has topped $108 a barrel, the highest price since 2008. Regular unleaded gasoline now goes for an average $3.69 a gallon, according to AAA’s daily fuel gauge survey, up 86 cents from a year ago.
The higher costs have been driven by unrest in Libya and other oil-producing Middle East countries, along with rising energy demand from a strengthening U.S. economy.
Airlines, shipping companies and other U.S. businesses have been squeezed. The rising prices are further straining an economy struggling with high unemployment and a depressed housing market.
“The surge in oil prices since the end of last year is already doing significant damage to the economy,” says Mark Zandi, chief economist at Moody’s Analytics.
Unlike other kinds of consumer spending, gasoline purchases provide less benefit for the U.S. economy. About half the revenue flows to oil exporting countries like Saudi Arabia and Canada, though U.S. oil companies and gasoline retailers also benefit.
For consumers, more expensive energy siphons away money that would otherwise be used for household purchases, from cars and furniture to clothing and vacations.
High energy prices are “putting a drain on consumer budgets,” says James Hamilton at the University of California, San Diego. “To the extent they’re having to spend more on gasoline, they have to make cutbacks elsewhere.”
Two-thirds of Americans say they expect rising gasoline prices to cause hardship for them or their families in the next six months, according to a new Associated Press-GfK Poll. The telephone poll conducted March 24-28 had a sampling error margin of plus or minus 4.2 percentage points.
Seventy-one percent say they’re cutting back on other expenses to make up for higher pump prices. Sixty-four percent say they’re driving less. And 53 percent say they’re changing vacation plans to stay closer to home.
“I try to leave the car parked at home all day Saturday,” says Curt Lindsay, who commutes an hour each way to his job as a computer systems administrator outside Washington, D.C. “I’d rather not spend the money on gasoline.”
Since gasoline prices topped $3 a gallon, Lindsay has also been trying to drive more slowly to conserve fuel.