All of this has happened so far. The happy confluence may continue, though fears remain strong that high energy prices will tip the U.S. into recession. A host of factors, including tight oil supplies and a weak U.S. dollar, suggest that oil prices have further to rise. Some analysts continue to believe that oil is destined to reach an all-time high, as measured in today's dollars, of more than $101 a barrel.


The record was set in 1980. On Friday in New York, the benchmark crude-oil futures price closed down $1.22, or 1.5%, to finish at $81.66, a little more than $2 off the all-time high, not adjusting for inflation.

High oil prices could lead to ugly consequences if they hit consumers' pocketbooks -- especially in the U.S., where the housing slump is already hurting the economy. Consumer spending has been the primary engine of growth in the U.S. in recent years. Target Corp. was among the major retailers in the last week cutting sales forecasts.

Target expects September sales at stores open at least a year to rise just 1.5% to 2.5%, down from an earlier expectation of 4% to 6% growth. For all the concern, the world today is better equipped to swallow expensive oil than it was when Jimmy Carter was installing solar panels and a wood-burning stove in the White House. The main reason has to do with what some call the Wal-Mart effect.

For every extra dollar taken from drivers' pockets at the pump in the form of higher prices in recent years, low-cost exporters from China and elsewhere have put roughly $1.50 back in the form of cheaper retail goods. Even at today's near-record prices, U.S. households today spend less than 4% of their disposable income at the pump, vs. over 6% in 1980.