Who's afraid of $100 a barrel?(The Week)(petroleum)

ON July 26, 1956, Egypt decided to nationalize the Suez Canal. Within a few months, Britain, France, and Israel attacked, and thrust the world's most important oil-producing region into turmoil. With the superhighway for their oil tankers shut, oil producers cut production by 1.7 million barrels a day in November, roughly a 10 percent decrease in world oil production. Oil prices surged, and the economy dipped into recession in 1957.

Looking back at U.S. economic history, it is remarkable how many U.S. recessions followed an almost identical script. In 1973, it was the oil embargo. In 1980, the Iran-Iraq War caused world oil production to drop 7.2 percent. In 1981 there was a recession. Iraq invaded Kuwait in 1990, and a recession again followed. In each of these episodes, the driving force turning Middle Eastern turmoil into American economic dismay was the price of oil.

With this long experience in mind, it is natural that the media would treat the recent advance of the price of oil above $100 per barrel as the last straw in a series of economic misfortunes. Think of the U.S. economy as the mad monk Rasputin, with the sea of expensive oil replacing the icy river that finally delivered the already shot, clubbed, and poisoned monk to his maker.

Except that the oil story is much different this time around: There is every reason to expect that high energy prices will do far less harm to the U.S. economy than they have in the past.

The reason is apparent in the attached chart. ...