Oil at $100 a barrel? No sweat

The price of today’s crude may sound frightening, but the U.S. economy should be able to absorb it, many experts insist.

NEW YORK (Fortune) — Crude’s surge last week took its price to an eye-popping $100 a barrel. The rise comes on top of a 57 percent jump for 2007 and puts oil within reach of its all-time inflation-adjusted high above $102, hit back in 1980.

The latest jump means that Americans can expect to pay more for everything from gasoline to food and clothes. Those rising prices threaten to constrict consumer spending, which is repsonsible for more than two-thirds of domestic economic activity.


A sharp consumer slowdown would be bad news indeed, because the economy is already showing signs of strain. The government reported Friday that only 18,000 jobs were created last month, a mere fraction of the number needed to keep up with population growth. The Institute for Supply Management’s factory index dropped below 50 in December, a sign manufacturing work is contracting.

So will $100-a-barrel oil be the straw that breaks the economy’s back? Probably not.

Fortune