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$100 a barrel? Don't panic

As oil teeters on that key barrier, analysts don't see it pushing the economy into recession.

NEW YORK - With oil having briefly touched the once unfathomable price of $100 a barrel, consumers can expect the cost of filling their gas tanks, heating their homes - in fact, the price of most everything - to also keep rising.

Still, analysts don't expect record-high prices by themselves to send the economy into recession, simply because as expensive as oil is, energy doesn't consume as big a chunk of Americans' budget as it did decades ago.

"So far, consumers have done an amazing job of ignoring high oil prices, not to mention falling home prices," said David Wyss, chief economist at Standard & Poor's.

A barrel of light, sweet crude reached triple digits for the first time Wednesday, soaring 44 percent since August and 57 percent since the end of 2006.

Rising energy prices were cited as a contributing factor in disappointing sales for the just-ended holiday season, along with the continuing slump in housing and an overall uneasiness about the economy. But economists say that, generally, the jump in oil is less devastating than previous spikes because incomes have risen faster than energy costs.

"The percentage (of personal income spent on energy) was far higher in 1979-80 than it is now," said Kay Smith, a macroeconomist at the Energy Information Administration.

In 1981, 14 to 15 percent of the nation's gross domestic product was spent on energy, said Lester Lave, professor of economics at Carnegie Mellon University's Tepper School of Business. That's fallen to 7 percent today.

In part, that's because energy efficiency has increased.

"It's just not (as) important to the economy anymore," Lave said. "Prices are not high enough so that they're going to get middle-income people to change their behavior." Still, that could change if prices keep rising.

Lower-income families feel the effects of price increases most dramatically. With heating oil costs expected to jump 33 percent this winter, according to the Energy Department, families who rely on heating oil will have less money to spend on other things.

Oil's march higher is expected to have more of an impact in the months ahead. For example, the chief financial officer of United Airlines owner UAL Corp. recently said airlines would have to keep raising fares or reduce capacity to compensate for rising fuel charges. Several carriers have announced new fuel surcharges in recent weeks.

The Energy Department's Energy Information Administration recently predicted gasoline prices nationwide will average $3.11 a gallon at the pump and peak above $3.40 in the spring.

Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service, said he wouldn't be surprised to see those estimates edge higher. He expects prices will peak closer to $3.50 or $3.75 this year.

Some analysts predict oil will continue to rise in the futures market, and if that's the case, $100 crude might sow the seeds of its own destruction. Many analysts believe higher prices will hurt demand, eventually.

"We think it important to keep in mind that all of the economic consequences of $100 crude are bearish, not bullish" for prices, Tim Evans, an analyst at Citigroup Inc. in New York, wrote in a recent research note.

[Last modified January 2, 2008, 23:39:18]