Moreover, if there is a specific cause for the rise in oil prices, it is the tightening of sanctions on Iran, which Republicans support. If, as many desire, military action is taken, the impact on oil prices and the world economy will be far greater.
In the longer run, a big reduction in US demand, still 20 per cent of the world’s total, might make an appreciable difference to prices. Moreover, the relative wastefulness of US oil use, compared with other high-income countries, would make such a reduction quite easy to achieve. The best way to make this happen would be to raise prices, via higher taxation. But that policy is deemed un-American. It is a policy fit only for European wimps.
Yet, despite the absurd politicking, we should be concerned about the economic impact of high oil prices: a rise of $10 in the price of oil shifts $320bn a year from higher-spending consumers to lower-spending producers, within and across countries. The 15 per cent rise since December 2011 would shift close to $500bn. The real price of oil is also very high, by historical standards (see chart). Further rises would take the world into uncharted territory. [...]