WASHINGTON %26mdash; The price of oil gushed to a record high Monday, spreading dangerously to factories, groceries, gas stations and every person’s pocketbook.
Builders are building less, the government reported.
Manufacturers are cutting back, another report said. General Motors Corp. and Ford Motor Co. said they would cut second-quarter production.
The galloping energy prices are doubly painful as the nation teeters on the edge of recession: High energy costs push companies to charge shoppers higher prices, then those consumers and businesses cut back in turn, dumping more cold water on the economy.
“It’s like throwing sands in the wheels of the economy,” said Brian Bethune, economist at Global Insight. “Things slow down. There is more friction, and there is more complaining.”
Oil prices marched past $103 a barrel Monday, the latest in a recent string of record-high oil prices, before settling at $102.45.
The steep run-up in oil and other energy prices “hits deeper and deeper into the consumers’ ability to spend. With a lot of households stretched by high food prices as well, it creates real problems,” said Joel Naroff, president of Naroff Economic Advisors.
Reports on Monday showed factories feeling the sting of soaring costs for oil as well as other raw materials %26mdash; pushing production costs higher even as some have to cope with fallout from a sour housing market that has sapped demand for their products.
The average price of a gallon of gasoline stood at $3.165 Monday, according to AAA and the Oil Price Information Service. The Energy Department expects gas prices to peak at a record level near $3.40 this spring, and some analysts predict pump prices could rise to nearly $4 a gallon when the summer driving season arrives.
It is not much better in the air. Airplane fares climbed 0.8 percent in January.
The price of diesel, used to transport most of the nation’s goods, is also soaring. Diesel hit a record of $3.674 a gallon Monday.
“Bulky items %26mdash; milk, soda pop, eggs, cheese, fruits and vegetables %26mdash; probably will have higher transportation costs to bring those items to stores,” Bethune said. “How much of that is passed along to customers depends. In terms of overall costs of products, it might not be huge. It could be a few cents. But overall it will add up.”
Food prices are rising, but it is hard to divine exactly how much of that increase can be traced to higher energy prices. Food prices rose 0.7 percent in January, reflecting more expensive fruits, vegetables, poultry, pork and dairy products, according to the Labor Department’s consumer price index.
High energy prices, the housing bust and a credit crisis are feeding fears that the country is heading into a recession or is in one already.The economy skidded to a near halt in the final three months of last year, growing at pace of just 0.6 percent.
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