Economists Downplay $100 Oil Prices Amid Rising Gasoline Costs

Oil prices have surged above $100 a barrel, but economists say this may not be as alarming as it seems. Brent crude oil reached nearly $110 a barrel on Monday before easing to around $107 on Tuesday.

The increase in oil prices has raised concerns about inflation and borrowing costs, evoking memories of the 1980 oil shock when Americans spent about 6% of their income on gas. Today, that share is down to 2.5% due to increased efficiency and lower demand.

However, economists are more concerned about the rising prices of gas and diesel, which directly affect households and businesses. If these prices remain high, Americans may have to cut back on spending while businesses will face higher costs for shipping goods, operating factories, and running farm equipment.

Michael Pearce, chief U.S. economist at Oxford Economics, notes that the re-emergence of the U.S. as a net energy exporter means oil shocks 'hit differently' today. He also emphasizes that there is no 'tipping point' for crude oil prices that will tip the economy into recession.

Patrick De Haan, head of Petroleum Analysis at GasBuddy, says $100 today does not carry the same weight it did decades ago and that oil may need to reach closer to $200 to have a similar effect on the economy. He also notes that higher diesel prices are causing indirect costs for consumers.

AAA reported that the national average for regular gasoline was trending toward $4.43 a gallon, up from $3.20 a year earlier. Diesel reached a record of $6.39 a gallon, compared with $3.70 a year earlier.