Price Pinch Unlikely to Halt Economic Growth
The recent rise in oil prices is likely to throw some sand in the wheels of the U.S. economic recovery this year, but not enough to derail it, economists said this week.</br></br>Even with crude oil prices around $40 a barrel, analysts said the recent increases just haven't been big enough to significantly brake a strongly expanding economy that is far less energy-reliant than it was in past decades, when soaring oil prices often preceded recessions.</br></br>The forecasts assume no major terrorist disruption of key Saudi Arabian oil fields -- a notable caveat after the attack on foreigners there last weekend. If such an event sent prices skyrocketing to $60 to $70 a barrel, that would have much more damaging effects, depending on how long they would stay that high and how consumers and businesses would respond.</br></br>"The momentum of the U.S. economy now is so strong that it would have to be a major oil crisis" to have a big impact, said Nariman Behravesh, chief economist for Global Insight Inc., an economic research firm.</br></br>Crude oil prices would have to rise to around $50 a barrel for at least three to six months to qualify as an economic shock comparable to those of the 1970s, Morgan Stanley chief economist Stephen S. Roach said in a recent analysis by the firm's global economic team. After adjusting for inflation, current oil prices are only about half what they were in 1981-82, when they hit their record highs.