More price rises in the pipeline

With oil having briefly touched the once unfathomable price of $100 a barrel, consumers can expect the cost of filling their gas tanks, heating their homes - in fact, the price of almost everything - to also keep rising.

Still, analysts do not expect record-high prices by themselves to send the US economy into recession, simply because expensive as oil is, energy doesn't consume as big a chunk of Americans' budget as it did decades ago.

"So far, consumers have done an amazing job of ignoring high oil prices, not to mention falling home prices," said David Wyss, chief economist at Standard & Poor's.

Gasoline prices at the pump reached a national average of 80 cents a liter, according to AAA and the Oil Price Information Service.

That's below their May peak of 85 cents a liter but likely to go higher as the spring and summer approach.

Lower-income families feel the effects of price increases most dramatically. With heating oil costs expected to jump 33 percent this winter, according to the Energy Department, families who rely on heating oil will have less money to spend on other things.

Oil's march higher is expected to have more of an impact in the months ahead.

For example, the chief financial officer of United Airlines owner UAL Corp recently said airlines would have to keep raising fares or reduce capacity to compensate for rising fuel charges. Several carriers have announced new fuel surcharges in recent weeks.

Many consumers have found ways to cope with higher energy costs, relying more on public transportation and lowering thermostats at home.

Some analysts predict oil will continue to rise in the futures market, and if that's the case, $100 crude might sow the seeds of its own destruction. Many analysts believe higher prices will hurt demand, eventually.

Agencies

(China Daily 01/04/2008 page17)