Pat Garofalo rounds up some of the latest data points suggesting that rising oil prices are a major threat to economic recovery. People are constrained in their short-term ability to reduce gasoline consumption when faced with higher prices. Thus, a price spike reveals itself partially in short-term reductions in gas consumption, but largely in short-term reductions in other kinds of consumption. And that can hammer the economy.
This problem of the short-term probably only has a good solution in the long-term. If we want to get out of the trap of oil price shocks, we need to transform our economy and transportation system to less reliance on cheap oil. But there are also things we can do in the short term. The mass transit operating expensive provision added to the war supplemental is good, and congress could do more in this regard.