It’s always something, isn’t it? As the dollar is on a general downtrend, oil, gas and related exchange traded funds (ETFs) are moving higher as new fears about consumer spending are ignited. Any slowdown could drag out a full economic recovery.

Oil prices fell more than $100 last year after hitting record highs in early July, sending signs of deflation up while consumers firmly closed their wallets.

A year later, the same fears are back. Gas prices are now up 60% at an inopportune time. The economy is showing early signs of life and commodity prices had been more or less stable for a few months. The largest worry is that the consumer will retreat once again, cutting off spending dramatically and putting a halt on the economic recovery, reports James Surowiecki for The New Yorker.

This concern is validated, as history indicates how sensitive the rising cost of gas and oil can be to consumer spending. Remember, cheap gas was one boon of the recession, and consumers were more willing to spend a bit more on items, as they had more free cash on hand, explains Kenneth Zenger for The Examiner. Likewise, the sale of big-ticket items such as homes and cars could once again be put on hold, as wary consumers will be too timid to spend.

As consumer spending slows down, businesses will have to adapt as well, because energy challenges are going to continue to be a factor in the economic recovery.

Consumer spending is two-thirds of the economy, so we need the cash flowing to keep recovering. Below, the three-month chart shows that as gas prices rise, retail spending begins to lose steam.

• SPDR S&P Retail (XRT): up 36.5% in the last three months; up 38% year-to-date (green line)
• United States Oil (USO): up 39.7% in the last three months; up 19% year-to-date (black line)

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Tags: Commodity ETFs, Energy, Oil, Retail, Sector ETFs, USO, XRT