Oil prices have jumped by about one-third since the summer on signs of stronger economic growth around the world and fear of instability in the Middle East.
So far, however, the run-up isn't setting off alarm bells. Prices remain far below their 2014 peaks. And U.S. producers are pumping at a record rate, leading some experts to bet that the higher prices won't last long.
Since mid-June, U.S. crude prices are up about 35 percent for U.S. crude, and Brent prices are nearly 40 percent higher than they were five months ago.
"That means slightly higher inflation, but we're not talking about unmanageable prices," said Diane Swonk, chief economist of DS Economics. "If it got back to $100 a barrel, then we would have a real problem."
Higher oil prices have pushed up gas prices in Chattanooga. According to GasBuddy's daily survey of 170 gas outlets in Chattanooga, average retail gasoline prices in Chattanooga rose 4.7 cents per gallon in the past week to $2.20 per gallon.
Although Chattanooga gas prices remain 35 cents per gallon below the U.S. averagee price of $2.55 per gallon, local fuel prices are stil 27.2 cents per gallon higher than the same day one year ago and are 3.5 cents per gallon lower than a month ago, GasBuddy.com said.
"If you use gas prices to figure out the time of year it is, you'd probably think it's spring based on the continued upward trend showing up in much of the country," said Patrick DeHaan, head of petroleum analysis for GasBuddy. "Absent is the beloved fall at the pump that we're used to that accompanies the fall weather, but apparently this year is playing a trick on motorists."
Nonetheless, Swonk said discretionary spending by consumers seems to be holding up despite the increase that has already shown up at the pump. In her mind and those of other economists, we are in better shape to manage higher energy prices for many reasons including a stronger economy and job growth.
Still, consumers will feel the effect, even if it's less dramatic than price spikes in 2008 and 2014. In the U.S., the average price for a gallon of regular gasoline has risen 30 cents since early July.
Moody's Analytics estimates that if the elevated oil prices last a year, they would cost U.S. consumers $30 billion and shave a couple tenths of a percentage point off the nation's economic output.
Chris Lafakis, an energy analyst at Moody's, said airlines and delivery companies such as FedEx and UPS will see profits reduced partly because they can't raise prices quickly enough when fuel costs rise. Oil-producing countries and oil companies — including U.S. outfits such as Exxon Mobil, Chevron, Devon and Anadarko — are the obvious winners, he said. Third-quarter profit at Exxon and Chevron was about 50 percent higher than a year ago, thanks to higher prices.
Jet fuel, which is closely tied to the price of oil, accounts for about one-third of an airline's operating costs — rivaling labor as the biggest expense. Helane Becker, an analyst for Cowen and Co., said that with oil in the mid-$60s, she expects airlines to attempt to raise ticket prices.
If fuel prices continue to rise, Becker said, airlines will cut back on plans to increase flying next year. That could tighten the supply of airline seats, driving prices yet higher.
Andrew Kenningham, chief global economist at Capital Economics in London, said however that the impact of higher oil prices on companies and households will be limited because for the year as a whole, average oil prices are up only slightly over 2016.
"So far the price moves have not been huge, so the economic impact shouldn't be that large," Kenningham said. He called the increase in average prices for 2017 "trivial" compared with the collapse from around $115 to less than $30 a barrel that occurred between mid-2014 and early 2016.
Crude prices began rising this summer as positive signs rolled in for the world's biggest energy-hungry economies: the U.S., Europe and China. Prices were also influenced as expectations grew that OPEC would continue to limit production next year, and on rising tension between Saudi Arabia and Iran.
Saudi Arabia, the world's biggest oil producer, is in the midst of an internal power struggle. Its ambitious crown prince, Mohammad bin Salman, has ordered the arrests of rivals, and some think he could take a tougher line against Iran, Saudi Arabia's rival for pre-eminence in the Middle East. That raises uncertainty about future oil supplies from the oil-rich region.
Meanwhile, higher prices are encouraging U.S. companies to pump more. The U.S. Energy Information Administration reported that domestic production hit a record 9.62 million barrels of oil a day in the week that ended Nov. 3, bouncing back from less than 8.5 million barrels a day as recently as October 2016.