Higher Gas Prices Will Hurt Consumer-Related Stocks: Report
“Higher spending on gas due to elevated gas prices may lead to decreased consumption of gas, decreased consumption of other goods, particularly more discretionary products, or lower levels of total consumption,” says the report.

Barclays analysts see downside to their 2012 earnings-per-share estimates for Autozone , OReilly Automotive and Advance Auto Parts if gas prices reach $4.25 or higher. At $4.50 a gallon, the downside risk is 3-4 percent; and at $5 a gallon, the downside risk is 6-9 percent.

The report also notes that “[auto parts] sales respond quickly and negatively to gas price increases but do not experience a corresponding lift with substantial declines in gas prices.”

Advance Auto Parts appears to have the most downside potential, according to the analysts, “given its higher cost structure and the higher distribution costs it could potentially incur.”

But the impact of higher gas prices on consumer spending depends more on the speed and duration of the increase rather than on the level of the increase, according to the report.

“If the rise is gradual and temporary, consumers are better able to modify their savings and spending patterns to smooth out overall consumption. This results in a more modest impact to consumption,” notes the report. “However, if the rise is rapid and sustained, consumers may need to significantly alter the level and composition of their spending levels.”

Barclays analysts see gasoline prices hitting $4.75 a gallon by July, if they rise at approximately the same speed and rate this year as in 2008, when pump prices reached their all-time high.

“Given that gas prices generally rise between now and Memorial Day due to seasonality and differences in refining methods, it appears likely that gas prices could surpass the 2011 peak of $3.99 reached in May 2011 and the historical peak of $4.11 in July 2008,” says the report.