Oil prices above $100 a barrel are causing less alarm for the US economy than they would have done in previous decades, although economists warn that persistently high petrol and diesel costs could still weaken household spending and push up business expenses.
Brent crude rose to almost $110 a barrel on Monday, its highest level since May, before easing to about $107 on Tuesday. The move revived concerns about inflation and borrowing costs, but analysts said the headline crude price was not the clearest measure of the pressure facing consumers.
Americans now spend about 2.5% of their income on petrol, compared with roughly 6% in 1980, according to JPMorgan analysis. The US has also re-emerged as a net energy exporter, meaning higher prices benefit domestic energy producers as well as hurting households.
Michael Pearce, chief US economist at Oxford Economics, said oil shocks “hit differently” today. While higher prices remain damaging for households, they can also provide a boost to energy companies.
“There is not a ‘tipping point’ for crude oil prices that will tip the economy into recession,” Mr Pearce said.
The more immediate concern is the effect of supply shortages on refined fuels, particularly petrol and diesel. Those prices affect consumers directly, while diesel is also used to transport goods and operate factories and farms.
The average price of regular petrol in the US was moving towards $4.43 a gallon on Thursday, up from $3.20 a year earlier, according to AAA. Diesel had reached a record $6.39 a gallon, compared with $3.70 a year earlier.
Mr Pearce said refinery capacity shortages had pushed up the cost of refined fuels by more than crude prices alone would suggest. If the higher prices persist, Oxford Economics estimates they could reduce the growth of consumer spending by a few tenths of a percentage point next year.
He said crude oil at about $140 a barrel would begin to cause more serious economic problems, although the impact would still be smaller in the US than in countries where energy accounts for a larger share of household budgets.
Patrick De Haan, head of petroleum analysis at the fuel-tracking app GasBuddy, said inflation meant that $100 oil no longer carried the same economic weight as it had in the past. He estimated crude might need to approach $200 a barrel to have a comparable effect today.
Lower-income households are more exposed because they already devote a larger proportion of their income to essential spending, leaving less room to absorb higher fuel bills. Mr De Haan said the indirect costs of diesel were not yet “insurmountable”, but warned consumers could face greater pressure around or shortly after the holidays if prices remained elevated.
For now, Mr De Haan said, “Americans can grimace and bear it.”
