There are plenty of reasons to be optimistic about the U.S. economy. Workers are earning more, consumers are spending more, banks are lending more, and companies are ready to hire more. But if there's one number that could derail the recovery, it's the price of a barrel of oil.
Economists and watchdog groups are nervously monitoring the rising price of crude, now hovering around $90 -- down from a 2008 high of nearly $150. "Oil prices are entering a dangerous zone for the global economy," warns Fatih Birol, chief economist of the International Energy Agency. "High oil prices threaten to derail the fragile economic recovery," echoes Sylvia Pfeiffer at the Financial Times. Meanwhile, other economists say there's very little reason to think oil should spook the fragile recovery.
Who should we believe, and why should we care in the first place?
WHY SHOULD YOU CARE?
The short answer is that expensive oil is poisonous to an oil-driven economy. Every severe oil spike in the last 50 years has been followed by a deep recession.
Here's the more complicated answer. The United States imported $400 billion of oil in 2008, nearly 3
percent of GDP -- or more than half the total cost of Social Security. Unlike Social Security, those hundreds of billions of dollars leave the country and don't get recycled into our economy. They're empty calories.
When gas prices rise, American consumers can buy the same amount of gas for more money, which makes us poorer; or they can buy less gas, which makes the economy weaker. In the last decade, the price of crude increased from $1.50 to $3.50, and Americans kept filling up their SUVs. Only at $4.00 did Americans recoil, reducing their total miles driven fell for the first time in 30 years by 100 billion miles.