Can the U.S. Economy Handle $100 Oil?

The price of oil may soon be hitting $100 a barrel. Fear ripples through economic circles at the notion oil and all things produced from oil would come with greater costs. Not all economists worry though. Some suggest that the high price of oil won’t impact the current economy to the same degree it did in 2011.

 

Now, there would be a decrease in the GDP as a result of the increased price of oil. Analysts at Bloomberg Economics pinpoint the estimated decline at 0.4%. While no one wants to see a decline, the minor decline can be manageable after taking into consideration other factors. Probably the biggest reason economists don’t see too much of an impact from the rising price of oil involves a decreased dependency. The United States simply isn’t as dependent on oil as it once was. The shale industry has cut down on the United States’ dependence on oil imports. As such, rising prices don’t yield the same effect as years past.

 

Also, technology and other developments reduce the amount of energy required for production. Oil isn’t only used to make gasoline. Electricity can be made from oil. A combination of lower fuel and electricity costs means less added costs to production. If the costs don’t increase, then there aren’t any additional expenses that must be passed to consumers.

 

The assessment isn’t intended to downplay the potentially serious impact of rising oil prices. Things would be better if oil wasn’t so expensive. However, no reasons exist to panic if the market becomes capable of handling the rise.

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