Oil prices topped $100 a barrel this week as the turmoil in the Mideast continued, posing the latest threat to fragile economic growth in the U.S. Gasoline prices spiked to a national average of $3.37 a gallon, nearly 27 cents higher than a month ago. The power struggle in Libya cut that country’s crude production by 50 percent, though Saudi Arabia, the world’s largest oil producer, stepped up production to offset some of the loss. If oil prices stay at historic highs, economists said, it could reduce the economy’s growth by about 0.3 percent, as consumers’ purchasing power takes a hit. Federal Reserve Chairman Ben Bernanke told Congress that while rising gas prices “represent a threat” to economic growth, they’re more likely to cause a temporary and modest jump in inflation.
No doubt about it—“the U.S. recovery is under threat,” said Irwin M. Stelzer in TheWeeklyStandard.com. In the past, there’s been a strong correlation between oil shocks and economic recessions. And inflationary pressures are mounting. With the government already doing everything possible to stimulate growth, policymakers have little room to maneuver if oil prices keep climbing.
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