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Gas prices and recovery

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By Optic Editorial Board

As of Monday afternoon, the cheapest gallon of gas in Las Vegas was $3.57 — and it’s probably higher by the time you read this. Some oil industry analysts are saying gas prices could hit as high as $5 per gallon by this summer.

That’s certainly a reason to be concerned for the captive audience called the U.S. consumer, but an even greater cause for concern is its impact on the recovering economy. Job growth has been accelerating since last summer, manufacturing is on the rebound and, slowly but surely, the U.S. economy is on the mend. The last thing this nation needs is for gasoline prices to drag it back down.

The cause of the increasing gas prices might not be what it seems. Analysts are saying it’s not a shortage of crude oil, nor is it Iran and its threats to close the Strait of Hormuz. Instead, it has more to do with the oil refineries, many of which lost money last year and are determined not to do so this year.

That’s bad news for the consumer, who may be able to cut back on recreational road trips but not the driving back and forth to work. If gasoline does indeed hit $5 by July, these consumers will be grumbling, but they’ll be paying nevertheless.

In the Las Vegas area, where many employees travel long distances to their jobs, it will be particularly tough to absorb such prices.  At the very least, it will cut into people’s disposable incomes and could have an impact on restaurants and retailers. Those would be harmful consequences for our local economy.

Still, there’s another side to this story, and it’s not nearly as gloomy. According to some economists, high gas prices have in the past hurt the economy by leading to a cutback in the sale of gas-guzzling vehicles, which would inevitably hurt Detroit (and, by extension, the rest of the country), but this time around, U.S. automakers are manufacturing a lot more fuel-efficient cars. Plus, a warmer-than-normal winter and some lower-than-normal natural gas bills could help the nation’s consumers absorb the rising gasoline prices. So this time, the U.S. consumer may not take such a big hit after all.

Let’s hope that’s true. The current economic recovery has been a long time coming. Maybe we can’t do much about the rising price of gasoline, but we can keep hoping it won’t mess with the recovery that’s finally taking hold.