Oil Price Climb Could Cripple Economic Recovery
Source: ABC, Alan Farnham and Susanna Kim (2/23/11)
"Surging oil prices could harm an economy recovering after two years in the doldrums."
Economists are concerned that surging oil prices could adversely affect consumers, possibly devastating an economy that's gaining traction after more than two years in the doldrums.
Weekly retail gasoline prices skyrocketed to $3.19 a gallon, according to the Department of Energy, the climb driven by the popular revolts spreading across the Middle East.
Daniel O'Connell, vice president of energy at MF Global, said if gas prices continue to accelerate ahead of May, when "driving season" picks up, "it will cripple the economy."
The U.S. weekly average price per gallon was up $0.54 since last year, and higher than last week's $3.14. This was the highest weekly price posted during the month of February since 1990, from available data. The most expensive regions again are New England at $3.23 and California at $3.56.
O'Connell said if crude oil does reach the brief high of $147 a barrel from July 2008, then the price of gas could also average $4.11 as it did then. In that scenario, he said consumers and retailers would not be able to absorb the higher gas prices as they did three years ago.
However, O'Connell said he does not suspect gas and oil prices to continue to accelerate for very long.
"It's going way up way too fast," said O'Connell.