Gas, heating oil prices continue rise

Economists said Wednesday that they are worried escalating gas and heating oil prices could stifle a tepid economic recovery and disrupt sales in industries beginning to show improvement.

Gasoline prices rose by another 3.1 cents a gallon on Long Island in the past week, to an average of $3.40 a gallon Wednesday, the AAA said. Heating oil rose by another 7.2 cents a gallon in the week ended Monday to average $3.614 gallon at full-service dealers, according to the New York State Energy Research and Development Authority.

Petroleum analyst Phil Flynn, of the futures brokerage PFGBest in Chicago, said that though he thinks cold weather will send heating oil prices still higher, the cost of heating oil and gasoline should recede next month.

"I would expect in two or three weeks we should be coming back down," he said.

Analyst Peter Beutel, an energy consultant and president of Cameron Hanover Inc. in New Canaan, Conn., says gasoline prices are being pushed upward faster than crude oil prices by investors buying futures and because major refinery maintenance done at this time of year tends to curtail gasoline production.

Prices for crude oil, gasoline's main ingredient, are about 10 percent higher than a year ago, at about $90 a barrel. A weekly MasterCard SpendingPulse report Wednesday said gasoline demand in the past four weeks has been flat compared with a year earlier.

The record high Long Island average for regular gasoline in the AAA survey was $4.346 a gallon, on July 8, 2008. That triggered a switch by consumers to hybrids and other fuel-efficient models.

But rising energy costs aren't the only cause for worry.

Food costs are also increasing, and a new report Wednesday predicted that consumers will watch their food dollars more carefully this year, using coupons, waiting for sales, buying more store brands and eating more leftovers. All those factors will force retailers to compete harder.

"They have so much to spend on food and they will carefully pick and choose how they spend it," said Harry Balzer, chief industry analyst for the NPD Group, retail consultants based in Port Washington.

Jeremy Anwyl, chief executive of the automotive information website Edmunds.com Inc., says this year's rising fuel prices could discourage some new-vehicle buyers, especially those considering thirsty vehicles such as SUVs and pickup trucks. But, he noted, new-vehicle sales last year were 11 percent above the year before. And, he said, January sales so far appear stronger than expected.

Economist Pearl Kamer of the Long Island Association, a business group, says higher fuel prices also jeopardize sales of other big-ticket items, like appliances and furniture.

"If they [consumers] have to spend more money at the pump, they can't spend it at the shopping mall," she said.

But, Kamer notes, Social Security taxes have been reduced this year, while jobless benefits have been extended.

"Those two items will pump $169 billion into the economy," she said.