Farfrompumpin - Oil's effect on the economy

Okay, I admit it, I like blogging about energy. There's a story in the NY Times today that asks the question about why the spike in oil & gas prices haven't negatively effected the economy. I contend that they have - both because I believe that there is a lot of trepidation out there because of it (see recent news on inflation) and because of the related heavy weight elephant in the room which may be partly to blame for the prices, namely the occupation of Iraq. The thing I found most interesting in the NY Times article were the accompanying graphics, which showed that pump prices are still about $0.75 below the 1980 inflation adjusted prices ($3 vs. $2.25), that the amount of energy required to produce a dollar of GDP was still way below what it was then (9000 BTUs vs. 17 ,000 in fairly steady decline since then), and spending on energy is mostly below what it was even a few years ago (6.5% of GDP on energy now as opposed to 8% in 73, exploding to 13.5% in 82, falling to 8% in 85, steadily declining to 7% in 96, then dipping to 6% in 97-99, and back up to the current level), but that the amount of household income spent on fuel, while below what it was in the 80s (8%), is starting to tip up ever so slightly right now (from 4 to about 5%). All of these are rough estimates from the charts.

The increasingly weak link between energy and GDP vs. what it was in the days of Arab Oil Embargos is well known, but the tip-up in household spending is something the Bush Administration should be alarmed about. And possibly take some blame for (though of course they can't be blamed for the fact that the Chinese are also putting demand-side pressure on the price).

Incidentally, the link to Carl Bialik's article in today's Wall Street Journal about aging statistics (statistics that have aged to obsolesence, not stats about the elderly) is funny because it discusses the increasing size of gorillas, i.e. "the million pound gorilla". Carl suggests that you try googling for gorilla and various weights in 100 pound increments. If the WSJ would make this stuff free, I'm sure there would have been hundreds of links to it by now.