As an American consumer, I’m usually unfazed by what I encounter in the world of retail. But even I had to mutter a few profane remarks the other day, after seeing how much it cost to fill my gas tank.

Gasoline prices have surged to seven-year highs. Greater pain at the pump doesn’t just affect your wallet…it can hurt your investments, too. Let’s examine the consequences of rising gas prices for the economy, financial markets and your portfolio.

The U.S. benchmark West Texas Intermediate (WTI) currently hovers at $72 per barrel and Brent North Sea crude, on which international oils are priced, at $73/bbl. But consider this: in late April 2020 the price of WTI fell to -$37/bbl. Yep, you read that right. For the first time in history, oil prices fell below $0. A negative price implies that sellers are willing to pay buyers to take their stock of oil.

Oil prices have since recovered, with the usual peaks and valleys along the way. After a long march back to stability, the energy markets are once again roiled by uncertainty, which threatens to derail the economic recovery and by extension the stock market.

On Wednesday, the Dow Jones Industrial Average climbed 104.42 points (+0.30%), the S&P 500 rose 14.59 points (+0.34%), and the tech-heavy NASDAQ inched up 1.42 points (+0.01%). Both the S&P 500 and NASDAQ closed at new record highs.

Watch This Video: Are Stocks Overvalued and Poised for a Fall?

Stocks are pricey right now. If the recovery loses steam, equity valuations will fall back to earth. This dynamic already may be happening. In pre-market futures contracts Thursday, stocks were trading sharply lower.

Americans hit the road…

The summer driving season is upon us. The automobile club AAA reported on Tuesday that gas prices are on track to jump 10 to 20 cents through the end of August.

The average price of a gallon of regular in the U.S. has risen to $3.13, according to AAA, versus $3.05 a month ago. A year ago, as the pandemic kept people home, a gallon of gas on average cost $2.18.

As they shake loose the shackles of pandemic quarantines, consumers are hopping into their cars and boosting gasoline demand. At the same time, crude oil prices have been soaring as the economy bounces back.

Take a look at the following chart, which depicts crude prices over the past 12 months, up through Wednesday, for WTI and Brent:

The wild card in the equation (as usual) is OPEC+, which failed in talks this week to reach an agreement on oil production mandates. It’s a familiar pattern in recent years: Oil minister meetings are scheduled with big fanfare, and then they just fizzle. It is increasingly apparent that Saudi Arabia, the cartel’s de facto leader, has lost control and OPEC+ isn’t the powerful monolith that it used to be.

U.S. and foreign energy companies cut back production during the pandemic, to boost prices and benefit their investors. Now that the global economy is improving and energy demand is picking up, analysts expected OPEC+ to gradually increase output. However, because of a rift among members, no clear policy has emerged.

The rise in gasoline prices comes at an inopportune time, as economic policymakers try to assess the threat of inflation. Are recent spikes in the consumer price index transitory or the start of a long-term trend? The Federal Reserve has been arguing that inflation will eventually cool down to an acceptable pace, but that school of thought will be sorely tested if gasoline prices continue soaring.

Consumer psychology plays a role. Rising prices for goods and services that Americans frequently buy, such as food and gasoline, can give the impression that inflation is worse than it appears, which in turn becomes a self-fulling prophesy as people and businesses start making decisions predicated on their belief that inflation will continue to get worse.

Higher energy prices hurt consumers and many businesses, but they’re a boon for the economically vital oil and gas sector. They’re also manna for energy equities. Wall Street typically views strong energy prices as indicative of a healthy economy. But it’s a matter of balance. If energy prices get too high, harmful inflation ensues and corporate operating margins get squeezed.

Distortions wrought by the coronavirus pandemic make the search for energy market equilibrium all the more elusive. Until we get clarity on oil, brace yourself for further stock market turmoil.

As I’ve just explained, volatility in the energy sector combined with soaring gas prices could trigger a stock market correction. My colleague Jim Pearce, chief investment strategist of Mayhem Trader, is an expert at profitably exploiting market imbalances.

In fact, Jim has pinpointed a group of tech stocks that are particularly vulnerable. By following his trading methodology, you can reap huge gains from their day of reckoning. To learn more, click here now.

John Persinos is the editorial director of Investing Daily. Send questions and comments to: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.