As Memorial Day weekend opens, the nationwide average for a gallon of unleaded is $3.81. Though prices have drifted lower in recent days, analysts expect average price for 2011 to come in higher than the previous record, $3.25 in 2008. A year ago, gas cost $2.76.
The squeeze is happening at a time when most people aren't getting raises, even as the economy recovers.
"These increases are not something consumers can shrug off," says James Hamilton, an economics professor at the University of California, San Diego, who studies gas prices. "It's a key part of the family budget."
The ramifications are far-reaching for an economy still struggling to gain momentum two years into a recovery. Economists say the gas squeeze makes people feel poorer than they actually are.
They're showing it by limiting spending far beyond the gas station. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S. Target said gas prices were hurting sales of clothes.
Every 50-cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year, Hamilton says. That's about one half of one percent of gross domestic product.
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