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Oil prices have risen more than $20 from their lows earlier this year and US gasoline prices have jumped, raising fears of another seventies-style “energy shock” that weakens the economy and forces the Federal Reserve into further monetary tightening.

Higher energy costs certainly could add to other factors – ebbing excess savings, student loan repayments, and slowing wage growth – in slowing consumer spending, particularly near the bottom of the US income distribution.

But when we put oil prices in real terms – adjusting them for the rate of overall inflation over time – it is clear that today’s surge pales in comparison with last year’s move, let alone some earlier historical precedents:

And the share of US consumer spending that is devoted to energy has fallen precipitously for decades, implying that gasoline prices would have to rise substantially – perhaps to more than twice today’s levels – before the typical household might experience economically-meaningfully negative effects.

We think Fed officials will follow a well-established historical playbook in “looking through” short-term fluctuations in commodity markets over the months ahead. And – although higher gasoline prices could weaken sentiment and raise consumer inflation expectations – deeper fundamentals are likely to keep driving household spending decisions.

The economy will experience this energy shock, but might not feel much of the awe.

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