How rising oil prices hurt the economy

The most obvious consequence is less spending by consumers, who represent a huge part of the overall economy. If folks have to fork over an extra $20 or $30 per fill up, they might be less likely to make discretionary purchases. Exactly where that tipping point lies is a matter of debate, but with the recovery still quite fragile it would seem that prices of $4 a gallon on up could do some damage. Right now, the average price in the L.A. area is over $3.57. The Atlantic's Daniel Indiviglio highlights some other concerns:

--Hiring slows (businesses become more skittish about higher costs)

--Home buying remains sluggish (especially in areas like the Inland Empire and Antelope Valley)

--Tourism takes a hit (one of the few industries in L.A. that has been picking up)

--Exports decline (more expensive shipping costs may weaken the demand for U.S. products).

--Deficits remain high (a slower economy would result in lower tax receipts)

Not surprisingly airline and retail stocks have been slumping in the last few days.


More by Mark Lacter:
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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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