Retail gas prices are spiking to levels last seen in the heat of summer driving season, raising fears that consumers could cut back on holiday spending.
But the crude rally propelling the jump at the pump hit the brakes Monday, as a barrel of oil tumbled more than 2 percent and the dollar strengthened after hitting a 14-month low.
(AP photo)
The average price for a gallon of regular gasoline rose for the 13th straight day, adding six-tenths of a cent overnight to $2.671, according to auto club AAA, Wright Express and Oil Price Information Service.
In the Chicago area, the average was $2.85 on Monday, up from $2.68 a week ago and $2.59 in late September, according to AAA. Typically, gas prices trend downward in the fall.
Rising pump prices could prompt consumers already dealing with a climbing unemployment rate, depreciating home prices and damaged 401(k) accounts to spend less over the holidays, said Ryan Sweet, a senior economist with Moody's Economy.com.
"If they're spending more money at the pump, they're going to be less willing to go out to the malls to spend frivolously," Sweet said. "Until consumers are confident in their jobs and future income, they're going to be very hesitant in spending."
Crude prices, which rose to $82 last week, fluctuated Monday as the dollar hit a fresh 14-month low against the euro before strengthening.
Benchmark crude for December delivery fell $1.82 to settle at $78.68 a barrel on the New York Mercantile Exchange.
PFGBest analyst Phil Flynn said weakness in the U.S. dollar has driven the price of oil far beyond the realities of what normal supply and demand fundamentals typically bear.
"The increase was driven not so much by demand but by declining gas production and a weakening dollar," Flynn said in his morning report. "Things are out of whack as refiners have scaled back production to historic lows as their margins get squeezed."
Traders will be looking to a slew of corporate results and economic indicators for guidance this week.
The Commerce Department is scheduled to announce third-quarter gross domestic product, with reports on housing prices, new home sales, consumer confidence and durable goods orders also due during the week.