Advisers: Gasoline Price Surge Threatens Economy

Thursday, 21 Feb 2013 08:01 AM

By Dan Weil

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U.S. gasoline prices have surged 13 percent in the last month, amid refinery closures at home and turmoil in producing countries abroad that has sent crude prices soaring.

The gas price increase puts the economic recovery at risk, Chris Varvares, senior managing director of Macroeconomic Advisers, tells CNBC.

U.S. gas prices averaged $3.75 a gallon Tuesday after rising for 32 consecutive days.

Editor's Note: The Final Turning Predicted for America. See Proof.

“The general expectation is that a global recovery is beginning to take hold,” Varvares says.

But “the current rise in gas and potential for more [price increases] are worrisome for the economy, given the tentative nature of the recovery we’re enjoying. It certainly bears watching if gas prices head toward $4.”

Gross domestic product shrank 0.1 percent in the fourth quarter, and economists’ consensus calls for growth of only about 2 percent this year.

John Kilduff, a partner at Again Capital, tells CNBC there’s “a real possibility" that gasoline will soar to $5 a gallon. “This is partly being driven by the lost refinery capacity of about one million barrels per day…that's a lot,” he says.

Varvares isn’t alone in his concern about the economy.

“Gasoline prices close to $4 a gallon would start to do real damage,” Mark Zandi, chief economist at Moody’s Analytics, tells ABC News. “We’re still not quite there yet, … but anything close to $4, that would hurt.”

“Gas prices are rising at a faster-than-expected pace,” Avery Ash, a AAA spokesman, tells Bloomberg. “There’s reason to suspect the peak we see will be earlier this year. We still expect they will peak at a lower level than in 2012,” but prices may approach that level, he says.

“What’s driving the price up is the fear we might not have enough supply,” Jason Schenker, president of Prestige Economics, an Austin, Texas-based energy consultant, tells Bloomberg. “It’s a national concern.”

However, Gallup’s Economic Confidence Index improved last week to -11 from -13 a week earlier.

“The fact that confidence did not decline this past week suggests surging gas prices have not shaken Americans' confidence in the economy yet,” Gallup states. “Even with high gas prices and the looming battle in Washington, D.C., over the budget sequester, stock values remain high, which could be the most important factor in Americans' stronger economic confidence this year.”

Editor's Note: The Final Turning Predicted for America. See Proof.

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