Oil prices are up 15% since the US and Israel began attacking Iran last weekend, and gasoline prices have been following not too far behind. In a big-picture economic sense, this matters a lot less than it used to. The oil intensity of gross domestic product is down about 70% in the US and 60% worldwide since the 1973-1974 oil crisis. The share of US consumer spending going to gasoline and other motor fuel was just 1.8% in December, down from more than 5% in the aftermath of the 1979 Iranian revolution.

Americans still hate it when gas prices go up, though. That’s partly because they’re among the most visible prices in the economy, but the fact that driving is essential to economic survival in most of the US seems relevant, too. Fuel costs are part of a much bigger package of expenses that come with owning or leasing a car or truck, and new and used cars and trucks have become much more expensive since the Covid-19 pandemic. Affordability has been economic topic A in the US since the inflation wave of 2021-2022, and cars and trucks have been a big part of that conversation.

© Bloomberg