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The producer price index, a key gauge of wholesale prices, rose 0.5 percent in March, according to the Labor Department. But if you were to strip out volatile food and energy costs, the core PPI rose just 0.1 percent last month, a clear sign that high energy prices have yet to affect the broader economy.
This assessment may be premature, though. That's because in recent weeks, oil prices have soared on renewed geopolitical fears—this time, centered on Iran's apparent plans to become a nuclear power (and possible U.S. efforts to foil them).
Crude oil futures contracts hit a record high of $70.88 a barrel early Tuesday, breaking the previous record of $70.85 a barrel set right after Hurricane Katrina last year, before easing off slightly.
Just as with Katrina, the brewing crisis in Iran is viewed as a potential threat to supplies. Many investors fear that economic sanctions or even military action against Iran could cause a major disruption in supplies from one of the world's biggest crude oil exporters. Making matters worse, rebel attacks in Nigeria have already begun curtailing the flow of crude from another top 10 producer.
Though high oil prices may not be seeping into the broader economy just yet, they are clearly affecting consumers. In the past two weeks, the average cost of a gallon of regular unleaded gasoline has risen from $2.59 to $2.78, according to the federal Energy Information Administration.
With the country about to enter the busy summer driving season, don't be surprised if gas prices approach $3 a gallon soon.
