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Gas prices: How much will they hurt the economy? (+video)

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The hardest hit? Those drivers who live in the poorest states and those who travel the longest distances. (See map, at right.) However, the price of gasoline has probably risen fastest in California. Since Jan. 1, the price of regular gasoline in the Golden State is up 61 cents a gallon.

For the nation as a whole, some economists now anticipate the price of gasoline at the pump will exceed $4 a gallon by Memorial Day, the official start of the summer driving season.

"If oil prices stay where they are at the end of February [close to $107 a barrel], it means gasoline prices in April and May will be about $4.25 a gallon nationwide," says Mark Zandi, chief economist at Moody's Analytics in West Chester, Pa. "If we stayed there for the year, it would shave about 0.5 [percent] off of gross domestic product growth."

How much would that hurt the economy?

Mr. Zandi says this could result in the loss of 500,000 jobs. "It basically means we don't make any progress on reducing unemployment this year," he says.

However, it could be even worse. Moody's has constructed what Zandi calls "some dark scenarios," including one in which this summer the Iranians shut down the Strait of Hormuz, through which one-fifth of the world's crude oil moves. If that were to happen, Moody's computer models indicate the price of gasoline on a national basis would surpass $5 a gallon.

"That would push us into a recession," he says.

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