White House: Oil price shock wouldn't 'derail' economy

Austan Goolsbee, the chairman of the White House Council of Economic Advisers, told reporters that, while no one likes to pay more at the gas pump, the United States would be better able to handle spikes in the price of oil today than in decades past. 

“If you look at energy consumption per dollar of GDP in the economy now, it’s dramatically lower that it was in 1979,” Goolsbee said, referencing an era when oil prices did become a drag on the economy. “We’ve become substantially more energy-efficient.”

The White House adviser made similar comments to reporters on Wednesday, when he discussed a new economic report. Treasury Secretary Timothy Geithner has also signaled that the world economy can handle increases in the price of oil.

After weeks of instability in the Middle East, most recently in Libya, oil prices hit $100 a barrel on Wednesday for the first time during the Obama administration. The Wall Street Journal has reported that, in general, economists believe that oil prices would have to stay at $120 a barrel for some time to really weigh on the economy. 

For his part, Goolsbee noted that consumer confidence seems to be on the rise, though he also acknowledged that there might be some “psychological aspects” to how the public responds to rising oil prices. 

“The way the economy works is not a cliff. There’s no sense in which the price of oil gets to $119.99 and when it hits 120, then you go into a recession,” Goolsbee said at a breakfast sponsored by The Christian Science Monitor.