It had been a nice run of, what, two-and-a-half years since a phrase like "spiking fuel costs" raised its ugly head. During the interim, of course, we bailed like mad as we rode out the Great Recession.
Now, with the recovery just gaining traction, turmoil in North Africa and the Middle East has sent fuel prices soaring again, threatening to impede economic growth. The oil markets, worried that civil war in Libya could spread, reacted to the risk with fear, pushing the price of oil to more than $100 a barrel in early March for the first time since September 2008.
And just like that, everyone from Fed chairman Ben Bernanke to the guy on the dock was talking about fuel costs again. Bernanke testified before Congress that a sustained increase in oil prices would threaten the economy, but that the increases as of early March didn't "pose a significant risk to the recovery or to overall inflation."
We all remember the summer of 2008, when boaters were paying, on average, about $4.89 for a gallon of gasoline and even more for diesel, according to an insurance company survey of a dozen marinas. Crude that summer hit a record high - just shy of $150 a barrel.
Earlier this month, the national average for a gallon of regular gasoline was about $3.50, which capped a climb of 34 cents in 13 days, the second-biggest price jump in the history of the gasoline market, according to reports. And a barrel of benchmark crude settled at $105 at the end of one trading session.
AutoNation CEO and chairman Mike Jackson told CNBC in early March that he had yet to see any impact from rising gas prices on either the number or type of vehicles sold in February. "Our industry is much better prepared than we were in '08 if there is a spike," Jackson told CNBC's "Squawk Box." "[Auto] inventories are a million units lower than in '08. Much more balance between trucks and fuel-efficient vehicles. As of this moment, we have not hit the freak-out number where people trade in Escalades on Minis."
The so-called "freak-out" number, Jackson noted, is somewhere above $4 for a gallon of regular. To reach that tipping point, crude would probably need to settle in at about $125 a barrel.
Is there a "freak-out" number for marine - one that affects how boaters use their craft, or makes them seriously consider a smaller, more fuel-efficient vessel, or worse yet, delay a purchase? I suspect the first serious speed bump is north of $5, but that's just a guess. With some luck, we won't find out this year.
Fear, uncertainty and the possibility of contagion, rather than an actual and significant disruption in oil supply, are driving prices higher. Libya, after all, produces only 2 percent of the world's supply.
In February, the supply of available oil exceeded global demand by about a million barrels a day, wrote Amy Myers Jaffe, an energy expert and author, in The New York Times. So why the sharp increase in price? Jaffe sums it up in one word: fear.
A little perspective: In late February, James D. Hamilton, a professor of economics at the University of California at San Diego, tried to assess the economic effect of the situation in Libya, based on past disruptions in oil supply. As a rule of thumb, Hamilton said in his blog, every increase of $10 in the price of crude translates to an additional 25 cents a gallon at the pump for consumers.
Hamilton wrote that there probably is less "psychological shock value" in rising fuel prices today, given that consumers saw $4 gasoline not that long ago. And while Detroit is selling more SUVs today than in the downturn of 2008, the number is nowhere near what it was in 2007 - in other words, Hamilton says, "there just isn't as far to fall, and not as much bite autos can take out of GDP."
An oil expert, Hamilton concluded that the events to date were not "in the same ballpark" as major oil disruptions of the past and, therefore, were unlikely to "produce big enough economic multipliers that they could precipitate a new economic downturn."
Writing in The New York Times in early March, Hamilton noted that it might not be wise to assume the turmoil will stop in Libya, given what's already happened in Tunisia and Egypt. "If the unrest spreads to key producers like Iran and Saudi Arabia, it would be hard to overstate the strain that would put on world oil supplies and the economies of the oil-importing countries," he wrote.
Even if we emerge from the current unrest relatively unscathed, Hamilton warns that in coming years we're likely to face more serious disruptions. And even without geopolitical eruptions, Hamilton says, continually increasing production to meet growing global demand will be difficult.
This article originally appeared in the April 2011 issue.