Gas prices menace battered economy
The national average is up 28% over the last month and a half, straining wallets and threatening the economic recovery.
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NEW YORK (CNNMoney.com) -- Gas prices are creeping towards $3 a gallon and consumers are getting squeezed. That has many analysts worried that another painful summer driving season will stifle an economic recovery.
Retail gas prices have risen daily since April 29, and are nearly $1 higher since the beginning of 2009, according to motorist group AAA. The national average now stands at $2.632 a gallon.
As gas prices rise, analysts warn that consumers will be forced to cut back on spending in other areas. That could make it harder for the economy to recover because consumer spending makes up the bulk of U.S. gross domestic product.
"Spending more on gas means you're spending less on everything else, and that's a cause for concern as we creep higher," said John Derrick, director of research at U.S. Global Investors.
Gas prices are still well below the highs of last summer, but the recent spike comes at a time when the economy is already struggling with high unemployment and a weak housing market.
"To have rising gas prices in this environment is very negative," Derrick said.
Joseph Webb, a network administrator in Fort Worth, Texas, said he has been forced to dip into his personal savings to cope with higher gas prices.
Webb, who spends between $60 and $120 a month on gas, said he has put off vacation plans this summer since gas prices have rebounded. "I can't let my family starve," he said.
Gas prices have been driven higher as the price of crude oil, which is the main ingredient in gasoline, has more than doubled since the end of last year. The price of oil rose to $72.68 a barrel Thursday, its highest level in more than 7 months.
However, many analysts say the runup in crude prices is not sustainable.
"Global oil supply is still outpacing global demand, and inventories are still rising," said Chris Lafakis, economist at Moody's Economy.com. "We think the oil market has gotten ahead of itself."
While demand for gas remains relatively weak because of the nation's economic woes, there are some signs that Americans are still willing to fill up their tanks.
Government figures showed Wednesday that demand for gas was up year-over-year for the first time in 2009.
Another government report showed Thursday that retail sales rose in May, due in large part to higher gas prices and purchases of automobiles.
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