Higher oil prices not causing concern
Oil prices have jumped by about one-third since the summer on signs of stronger economic growth around the world and fear of instability in the Middle East.
So far, however, the run-up isn’t setting off alarm bells. Prices remain far below their 2014 peaks. And U.S. producers are pumping at a record rate, leading some experts to bet that the higher prices won’t last long.
At midday Monday, Brent crude, the benchmark international price, was down 27 cents to $63.25, while the standard for U.S. oil was up 10 cents to $56.84.
Those are sharp increases since mid-June – about 35 percent for U.S. crude, nearly 40 percent for Brent.
“That means slightly higher inflation, but we’re not talking about unmanageable prices,” said Diane Swonk, chief economist of DS Economics. “If it got back to $100 a barrel, then we would have a real problem.”
Swonk said discretionary spending by consumers seems to be holding up despite the increase that has already shown up at the pump. In her mind and those of other economists, we are in better shape to manage higher energy prices for many reasons, including a stronger economy and job growth.
Still, consumers will feel the effect, even if it’s less dramatic than price spikes in 2008 and 2014. In the U.S., the average price for a gallon of regular gasoline has risen 30 cents since early July.
Moody’s Analytics estimates that if the elevated oil prices last a year, they would cost U.S. consumers $30 billion and shave a couple tenths of a percentage point off the nation’s economic output.