NORTH COUNTY -- Gas prices rocketed upward this week and neared an all-time high in North County, raising concerns that the economy is approaching the dreaded dual evils of "stagflation" -- a stagnant economy with a weakening dollar.

Rising gasoline costs exacerbate both concerns. Consumers are less likely to spend money on luxuries when they have to spend a lot on gas, hurting the economy. And more expensive gas means higher transportation costs, increasing the price of core goods and devaluing the dollar.

"It's having an effect on both sides of the equation," said Kelly Cunningham, an economist with the San Diego Institute for Policy Research. "Especially considering we're losing that money as we buy foreign oil. That doesn't help the U.S. economy in any respect."

An average gallon of gas sold for $3.41 this week, up almost 20 cents in just one week and staying well ahead of a national average of $3.13, said Charles Langley, a consumer advocate who compiles a weekly gas price survey for the North County Times.

Federal Reserve Chairman Ben Bernanke predicted economic growth for the year Thursday while President Bush downplayed the possibility of gas reaching $4 a gallon by the summer, when higher demand typically drives up cost.

"I don't anticipate stagflation," Bernanke told lawmakers. "I don't think we're anywhere near the situation that prevailed in the 1970s."

Cunningham said he does not share in the optimism.

"If we're not (experiencing stagflation) now, we're certainly pointing in that direction," he said.

The jump is the largest of the year and puts the gas price at just 4 cents cheaper than the all-time high set last May, Langley said.

"We've never seen prices this high this early in the year," he said. "Usually, prices hit their high in April or May."

Meanwhile, the price does not show any indication of dropping in the near future as crude oil hit an inflation-adjusted record high of $102.59 a barrel on Thursday. The high price of oil is exacerbated by a weak dollar, which makes it cheaper for emerging economies such as China and India to feed their explosive economic growth.

But Langley said the price of oil does not affect current high prices and will show up within three to four months because of the time it takes to refine the oil into gasoline.

Because of that delay, Langley said high prices now contradict healthy statewide supply and falling demand.

The state's Board of Equalization issued a report Thursday saying that gas usage in the state fell in November 2007, the latest month available, from the same time a year earlier. It was the sixth straight month in which a year-over-year decline was posted.

And Susanne Garfield, a spokeswoman for the California Energy Commission, said production and inventories at refineries throughout the state are at healthy levels.

"If there was a law of supply and demand, someone would be arrested for breaking it," said Langley, who points to a lack of competition among refineries for higher prices.

But Garfield said she thought the market was simply responding to political uncertainty in oil-rich countries throughout the Middle East.

She said the wholesale price of gasoline reached $2.77 per gallon Wednesday after starting the year at about $2.39, which represents a steady increase upward.

"This is such a skittish market that's fraught with rumors and speculation that it doesn't take much to drive up the wholesale price," she said.

The wholesale price of gasoline, also known as the spot market, is the cost at which smaller, independent gas stations buy fuel from refineries.

Langley's lowest recorded price Thursday came from the Costco on Hacienda Street in Vista, selling it for $3.27 a gallon.

The Associated Press contributed to this report.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.