Figure 3 shows the improved performance of the U.S. economy based on per barrel of oil consumed. The graph essentially reflects the combined effects of inflation and the decreased reliance on oil. However, the percent of GDP spent on crude oil is less than 2 percent and was just 1 percent in 1998, compared to more than 6 percent in 1980-81. This indicates that rising oil prices are less capable now of affecting the economy than they did in 1980. Price Impacts Michigan and the nation are impacted by higher oil prices by direct, indirect, and induced economic multiplier effects.
Direct impacts are the increased expenses for purchased oil or oil products.
Indirect impacts include the changed prices paid for other products and services, which pass along the higher fuel costs in the product prices. Last are the induced impacts of price increases. The initial direct and indirect impacts cause consumer prices to rise, and this feeds through to wage increases, which raises labor costs, which, in turn, raises the prices of products and services. For consumer prices, the GAO looked at the direct increases in expenses for consumers for gasoline, fuel oil, etc. Figure 4 captures in a simple way the direct and indirect impacts to consumers.