Just as the job market outlook is becoming favorable, high fuel costs are threatening to slow down economic gains forcing economists to scale down their growth forecast for 2011 as a result of flat wages leaving households unable to pay increasing gasoline costs.

The price of fuel has reached $108 per barrel, its highest since 2008. Regular unleaded is now worth an average of $3.69 per gallon, based on AAA’s daily fuel gauge survey, an increase of 86 cents from last year.

The increase in fuel prices has been triggered by the unrest in Libya and other oil-producing Middle East states and the high demand from a surging US economy. This will add up to the problem brought about by high unemployment and depressed real estate market.

According to a recent poll conducted by the Associated Press from March 24-28, two-thirds of Americans anticipate harder time in the next six months as a result of the increase in oil prices. The new survey has a plus or minus 4.2 percentage points margin of error.

The same poll revealed that seventy one percent of Americans will implement cost cutting measures to compensate for the increasing oil price. Sixty four percent will be driving less while 53 percent will modify their vacation plans to a closer destination.

Apparently, the high fuel cost is not only affecting households but businesses as well. Grasshopper Lawn Care has been charging 5 percent to customer’s bills to make up for the higher fuel price. It is buying over 8,000 gallons of gasoline annually. According to owner Dan Kessler, they intend to maintain the surcharge until fuel costs drop to $3 per gallon.

The increasing fuel prices have been eating up whatever gains were achieved in the job market. The unemployment rate despite still being high is at its lowest level since 2009. Bernard Baumohl, Chief Economist of the Economic Outlook Group, has decreased his growth figures from 3.5 percent to 2.8 percent. Last year, economic growth was at 2.9 percent.

Consumer spending constitutes around 70 percent of the economy. After reflecting adjustments for inflation as well as seasonal factors, consumer spending was 0.3 percent higher in February compared to January. The surging cost of oil has eaten up the cash that Americans are getting from tax cuts from Social Security.

Mark Zandi, the chief economist of Moody’s Analytics, said that the increase in oil prices has taken 0.5 percentage points from the growth achieved in the first quarter of this year. His forecast placed the economic growth for the quarter at 2.6 percent.

Zandi predicts that if fuel prices stay at the average of $100 per barrel this year, the economy will be 0.3 percentage points lower if costs remained at less than $80 a barrel. If oil price remains at $125 for a few months, the economy will grow by a full percentage point. If the cost of gasoline reaches the $150 per barrel average even for just a few months, there will be another economic recession.

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