Oil shock hurting U.S.economy

May 27, 2008 at 11:02 AM
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NEW YORK, May 27 (UPI) -- Fast-rising crude oil costs have sparked divided opinions on whether the U.S. economy will sink into a recession, economists said.

"The economy is still growing. There's nothing magical about $130 per barrel oil," economist Richard DeKaser of National City Corp. told The Christian Science Monitor.

But, "for the average American, we are in a recession," economist Mark Zandi of Moody's Economy.com told the paper.

Recession or not, the impact of rising oil prices is measurable, economists said.

If a $10 per barrel gain in oil prices subtracts 0.2 percent from the nation's gross domestic product, as economists calculate, then the value of U.S. goods and services has declined 1.6 percent on rising oil prices since Jan. 1, the paper reported.

The largest sector of the economy, consumer spending, also feels the impact with "just over $1 billion" per year diverted to oil for every 1 cent rise in a gallon of gasoline, Zandi said.

Economists have given the recent price increases the economic malaise a new term: "Oil shock."

"We have been struggling against a severe headwind, and the latest developments suggest the headwind is increasing," Mr. DeKaser said.

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