Americans are getting hit on all fronts nowadays. Wages are flat or falling. Income tax bills are due by April 18. Food prices are rising. And gas prices, which are soaring toward $4 a gallon, now threaten to reverse the nation's economic growth rate.
Gasoline prices are rising because of the skyrocketing price of oil, which this week topped $108 a barrel. A gallon of regular averaged $3.71, according to AAA's daily tracking survey on Wednesday, up by nearly 90 cents in the past year. But in many parts of the country, gas prices have soared to more than $4.
This is not only squeezing consumers and businesses across the board, it's also threatening the nation's economic recovery to the point where top economists are now dramatically lowering their previous growth forecasts. That means a weakening recovery and slower job growth.
"The surge in oil prices since the end of last year is already doing significant damage to the economy," says chief economist Mark Zandi at Moody's Analytics.
Zandi says economic growth will be 0.3 of a percentage point lower if oil prices remain more than $100 a barrel this year. Should prices surge to $125 a barrel, economic growth would be cut by a full percentage point, and if oil prices go higher, the economy could be driven back into a recession.
The economy was modestly growing by little more than 3 percent in the fourth quarter of 2010, not enough to make a big dent in a nearly 9 percent unemployment rate.
But Zandi estimates that oil prices have sliced half of a point from the January-March first-quarter growth rate. That will push economic growth to a feeble 2.6 percent, which could drive jobless rates back to higher levels again.
Bernard Baumohl, chief economist at the Economic Outlook Group, has reduced his growth forecast this year from 3.5 percent to 2.8 percent.
s consumers are forced to spend more at the pump, they have less to spend on everything else. An Associated Press- GfK poll released this week found that "Two-thirds of Americans say they expect rising gasoline prices to cause hardship for them or their families in the next six months."
Seventy-one percent say they're cutting back on other purchases to offset higher gas prices; 64 percent were driving less; 53 percent said they were abandoning vacation plans this summer and staying "closer to home."
What is the Obama administration doing about higher oil and gas prices? The short answer is: "not much."
President Obama came into office emphasizing a major energy-policy switch, focusing on biofuel research -- still years away from becoming a viable, cost-efficient energy alternative.