Rent-to-own News - Rising gas prices taking a pinch out of consumer spending

High gas prices and the wave of price increases following in their wake could cramp consumer spending and stifle the fragile economic recovery, economists say.

The average price of a gallon of regular gasoline hit $2.70 on Thursday, according to the auto club AAA. That's up 67 percent from this time last year, and it's the highest price since October 2008 -- a fact not lost on drivers.

And the cost increases won't ease anytime soon. Pump prices hovering between $3.50 and $4 per gallon in the D.C. area could look like a bargain once the peak summer season hits, according to the U.S. Energy Information Administration and the Washington Examiner.

Gas already sells for more than $3 per gallon in Alaska, California and Hawaii. In the Washington region, the District has the highest average price, at $2.79 per gallon, followed by Maryland ($2.68) and Virginia ($2.60), AAA said.

And ongoing volatility in the food markets combined with lingering effects of lousy growing seasons mean that ratcheted up grocery prices could linger through the summer months.

And higher grocery and fuel costs mean less disposable income.

The average U.S. household will spend $700 more on gasoline in 2011 than in 2010, the energy administration said. But with the D.C. area's higher-than-average gas prices and longer-than-average commutes, suburban commuters especially could pay significantly more than the Joe Smiths of Middle America.

Chad Stone, chief economist at the Center on Budget and Policy Priorities, told the Washington Examiner the higher prices were comparable to "a tax that takes out purchasing power -- and right now you don't want to reduce people's purchasing power."

In the long term, though, Stone said that most economists agree that price increases in two sectors -- and relatively small increases compared to, say, the quadrupling of oil prices in the early 1970s -- aren't enough to fully derail economic recovery.