WASHINGTON — Oil at $100 a barrel may frighten anybody with a car or a fuel-intensive business, but analysts from Standard & Poor's said Thursday that a price spike of that magnitude would not send the U.S. economy into a recession.
S&P chief economist David Wyss said if crude oil, now trading above $74 a barrel, were to climb an additional 33 percent it would slice about 1.5 percent off annualized economic growth. That would still leave the American financial engine moving forward.
"The bad news is that is a very significant slowdown in growth, and some industries will be affected a lot more than others," said Wyss, who led an hourlong teleconference along with S&P credit analysts covering a handful of energy-sensitive sectors. At current oil-price levels, Wyss expects GDP growth of 2.5 percent in 2007.
Oil futures reached a nominal record above $78 a barrel on the New York Mercantile Exchange earlier this month. Adjusting for inflation, though, oil prices would need to reach about $95 a barrel — and stay there for a month — to beat the record set in 1979 following the Iranian revolution.
The industries that would be most harmed by $100-a-barrel — and S&P does not consider that inevitable — are airlines, auto manufacturers, chemical makers and retailers catering to lower-income families, S&P said.
S&P retail analyst William Wetreich said big-box discounters and fast-food restaurants were particularly vulnerable. "The worst-case scenario would be a sudden spike before the Christmas shopping season," Wetreich said.
In contrast, if prices moved gradually toward the $100 level, that would ease the impact on consumer confidence and discretionary spending.
Philip Baggaley, S&P's airline analyst, noted that U.S. carriers have just begun to offset soaring jet-fuel costs by raising fares. But $100 oil "would drive costs beyond what could be recovered" through higher ticket prices, not to mention causing a painful reduction in demand as leisure travelers tighten their budgets.
"Airlines would be caught in a squeeze," Baggaley said, noting that bankrupt carriers Delta Air Lines Inc. and Northwest Airlines Corp. were the most vulnerable.
Of course, at $100 a barrel, major oil companies stand to make more money than they already have — as long as higher prices do not significantly crimp demand. S&P energy analyst John Thieroff said there is no guarantee this would happen.
"I don't know that $100 oil would cool off demand in China and India," he said. "And if demand stays anywhere near as strong there at the higher price level, other places (meaning the U.S.) may have to suffer along."