Record Gasoline Grips Europe, California Faces $4 a Gallon (Brian Swint)

Mar. 4, 2011 (Bloomberg) -- Gasoline prices are setting records across Europe and exceeding $4 a gallon in California as the rise in crude oil caused by the conflict in Libya punishes companies and consumers.

Households are cutting back on travel, cinema visits and groceries in the U.K., where prices jumped to 130.68 pence a liter ($8.06 a gallon) yesterday, according to research from the Automobile Association, Britain’s largest motoring organization. Prices set records in the Netherlands and Italy today. The current average U.S. gasoline price is near a two-year high at $3.81 a gallon, according to the AAA website.

Crude oil’s rise to as high as $119 in Europe has pushed fuel costs up and put the economic recovery at risk. The impact on consumer prices may push European Central Bank President Jean-Claude Trichet to raise interest rates as soon as next month to discourage higher wages and head off the threat of an inflationary spiral.

“Rising fuel costs are negative because they push inflation up and slow the economy down,” said Philip Shaw, chief economist at Investec Securities in London. “It is essentially energy costs that have resulted in ECB putting its finger on the interest rate trigger.”

READ MORE: Bloomberg