Leading Economists Predict: Good News! Gas Prices to Drop and Stabilize by Summer

According to a survey of economists taken by the Associated Press, there will be some relief this summer when it comes to gas prices:

Economists think gas prices, now averaging $3.87 a gallon and rising every day, will stabilize by summer and drop to about $3.50 by fall. Rising gas prices are taking up much of what Americans are pocketing from the Social Security tax cut.

Also, as long as oil prices do not skyrocket, these economists predict good times ahead for the American economy:

The American economy is now strong enough to withstand Middle East turmoil and the Japanese nuclear crisis. Only a big rise in the price of oil could stop it now.

Those are the findings of an Associated Press survey of leading economists, who are increasingly confident in a recovery that is nearly two years old. They expect the economy to grow faster every quarter this year.

In part, that's because the economists think Americans will spend more freely in the coming months. Higher stock prices have made people wealthier. And a cut in the Social Security payroll tax is giving most households an extra $1,000 to $2,000 this year.

American exports and corporate spending, which have helped drive the recovery, are also expected to remain strong, according to the quarterly AP Economy Survey.

The one factor that could make a second recession a possibility would be a jump in oil prices to $150 a barrel, economists say. Oil trades at about $112 a barrel now. The record high, set in the summer of 2008, is about $147 a barrel.

"The economy is regaining some of its lost muscle and now seems to have a much thicker skin than it did six months or a year ago, and that's helping it handle various negative forces," said Lynn Reaser, a board member of the National Association for Business Economics.

While oil has risen almost $40 a barrel since Labor Day, analysts think it would take something extraordinary to drive the price all the way to a new record - either supply disruptions because of a new front in the Mideast unrest or action by the Federal Reserve that brings down the value of the dollar.

Full story here.