Just as the U.S. and global economies are finally strengthening, they face a new danger: Rocketing oil prices, which topped $100 a barrel Wednesday.
The U.S. economy can likely absorb $100 oil and keep expanding, even though gasoline prices would rise further and growth would slow. But it would hurt.
Gasoline for U.S. motorists already costs more than at any point since 2008, despite ample supplies. The national average for a gallon of unleaded was $3.19 on Wednesday _ 53 cents more than a year ago. Analysts expect the average to range between $3.25 and $3.75 this spring.
Oil prices had been rising for months, but they jumped this week as violence gripped Libya. Analysts say any production declines in Libya could likely be absorbed by other producers like Saudi Arabia. Libyan oil accounts for less than 1 percent of U.S. crude imports.
Still, analysts say concerns about violence in North Africa and Middle East have put a "fear premium" that's added about $10 a barrel.
Consumers and businesses would feel pinched by a sustained period of $100-a-barrel oil _ and not just motorists. Stock prices, which have lost more than 2 percent so far this week, could sink further. That would reduce household wealth and consumer confidence. As fuel costs price rise, so would prices for travel services and products containing plastics.
This month, several airlines tacked on fuel surcharges _ extra fees that help cover fuel bills.
Rising oil prices have pushed jet fuel close to $3 a gallon. Fuel accounts for roughly one-third of the budget for U.S. airlines, up from less than one-fifth a decade ago. Fitch Ratings analyst William Warlick said if jet fuel reaches about $3.20 a gallon, "the whole industry will be challenged to stay profitable."
Airlines may soon decide to eliminate some flights and ground older jets to cut fuel consumption, Warlick said. Delta Air Lines has already scaled back plans to add flights this year.
Analysts estimate that over a year, $100 oil would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. So rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That would likely mean less hiring and higher unemployment.
The global economy wouldn't be affected as much. In part, that's because emerging economies consume less oil, per person, than industrialized countries do. In addition, many developing countries regulate or subsidize the cost of gas. Global growth would slip about 0.1 percentage point, economists estimate.
But oil prices around $100 a barrel could threaten European economies, many of which are net importers of oil and gas, haven't fully recovered from the financial crisis and face heavy debt loads. Spain and Italy, for example, where gas at the pump already goes for about $8 a gallon, face years of a slow, grinding recovery. A spike in oil would deal their economies another setback.
Pricier oil would also push up inflation in Europe, where it already exceeds official targets, and in countries with surging food prices, like China, Brazil and India. Those countries might then have to raise interest rates to cool inflation. Doing so, in turn, would slow growth in Latin America and Asia.
A darker possibility _ one that few analysts expect _ is that oil prices will keep rising until they reach $150 or more and then stay there for months. Under that scenario, another recession is possible, economists say.
Gasoline prices would near $5 a gallon. Consumers would spend much less. So would businesses, which would slash jobs.
"It would nail the economy," said Mark Zandi, chief economist at Moody's Analytics. "All the benefits of the tax breaks we got in last year's tax-cut deal would be completely wiped out and then some."
One reason the United States and other developed countries can still grow with oil at $100 a barrel is they've become more energy-efficient since the oil-price shocks of the 1970s. U.S. retailers and manufacturers that use oil-produced plastics, for example, have been shrinking packaging and packing more items onto their trucks. A new wave of redesigned products, like ultra-thin plastic bottles of water, has also emerged.
"Companies have been very clever in what they can do to reduce the production costs without affecting performance," said Jonathan Asher of Perception Research Services, which works with consumer product companies. The latest surge in oil "will turn up the heat even more."
Marc Rosenberg, a marketing official for WowWee Toys, says its products use 30 percent less plastic compared with five years ago.
"Can we live with $100 a barrel oil?" said economist Ken Mayland of ClearView Economics. "I think so. Can that economy still grow if oil is at $110 a barrel? Yes. But past that, you start getting uncomfortably close to the point where people start curbing their spending."
An example was in July 2008. That's when Americans faced record-high oil prices _ $147 a barrel. Gasoline prices followed suit. They hit a record $4.11 a gallon nationwide.
The economy was already in a recession in the summer of 2008. But consumers hadn't yet cut their spending much. That changed in the third quarter of 2008 as oil and gas prices soared. Consumers slashed spending at a 3.5 percent annualized rate. It was the sharpest drop since 1980.
Ken Perkins of RetailMetrics, a retail research firm, thinks higher gas prices at the tank are already affecting low-income shoppers who are also paying higher grocery prices. He says gas prices would have to reach $4 a gallon or more to affect moderate-income consumers.
Perkins said more people will shop at neighborhood dollar chains or drugstores to pick up milk or bread and save on gas, further hurting Wal-Mart Stores Inc. Wal-Mart's sales have already been hammered by stepped-up competition.
Fears of another unchecked jump in prices have rattled investors. This week, investors have dumped stocks and shifted money into the safety of Treasury bonds, causing Treasury yields to fall.
The rise in Treasury prices this week lowered the yield on the 10-year Treasury note to 3.49 percent. That yield is used to peg rates on home mortgages and other consumer loans. Borrowers would face lower costs as such rates fall.
That said, interest rates are already relatively low by historical standards. So even a sustained decline in rates, by itself, wouldn't much stimulate Americans' appetite to spend, economists say.
A persistent drop in the stock market, though, would likely chill spending, especially by wealthier Americans. Europe's debt crisis in the spring of 2010 jolted Wall Street and slowed the U.S. economy as Americans reined in their spending.
David Hensley, an economist at JPMorgan Chase, said that if oil prices level off, even at $100 a barrel, the damage to the global economy would be slight and likely confined to the first half of this year. He thinks most countries could adapt to higher prices.
"But if the price keeps going up, and it's accompanied by falling stock prices, then it takes on a more sinister tone," Hensley said.
AP Business Writers Sandy Shore in Denver, Carlo Piovano in London, David Koenig in Dallas and Samantha Bomkamp, Anne D'Innocenzio and Chris Kahn in New York contributed to this report.