As the price of crude oil approaches record highs, the impact is beginning to flow far beyond the corner gas station.
It's slicing through the economy, cutting into corporate profits, raising the cost of food, airline tickets, delivery services and countless other products.
The cost of petroleum-based consumer goods -- everything from plastic wrap to Goretex to aspirin, luggage, surfboards and nylon stockings -- is expected to rise.
Combined with record gasoline prices at the pumps, the spreading energy inflation means that Americans will have less spending power -- which is likely to dampen the economic recovery, experts say.
For every $5 per barrel increase in the price of oil, roughly half a percentage point is shaved from the U.S. gross domestic product, economists say. Currently, that would be about $55 billion a year in lost production.
The economy is less dependent on oil than a generation ago, but if oil prices remain near current levels or higher, expensive energy is certain to be an increasingly serious problem.
"It does threaten the economy," said Lacy Hunt, chief economist at Hoisington Investment Management Co., an Austin, Texas-based money management firm. "We have not done well with oil shocks."
Crude oil futures rose yesterday to nearly $40 a barrel on the New York Mercantile Exchange, before settling at $39.37, down 20 cents from the day before. On Wednesday, the benchmark crude contract hit a 13-year high, closing at $39.57, the highest closing since October 1990, during the buildup to the Persian Gulf war.
Oil is still cheaper, adjusted for inflation, than during a spike in the 1970s, but the outlook is more ominous because of voracious global demand, limited reserves and potential supply disruptions in the Middle East.
Federal Reserve Chairman Alan Greenspan warned in a recent speech that "dramatic increases" in oil and natural gas futures prices could "significantly affect the long-term path of the U.S. economy."
"You ain't seen nothing yet," said Douglas G. Ober, chairman and chief executive of Petroleum & Resources Corp., a Baltimore-based closed-end mutual fund. "While we will see seasonal dips, we will see a general upward trend as long as the Chinese economy is growing at 8 percent or more."
The pain is already apparent in some sectors of the economy.
