–A $10 increase in the cost of oil leads to about 25 cents more per gallon at the pump.
–Every extra penny at the pump takes around a billion dollars from disposable income for other consumption.
–That same $10 increase, if sustained for a year, shaves about 0.25 basis points (one-quarter of a percentage point) off of real GDP growth.
–Adding rules of thumb, for each percentage point that real GDP grows below trend, with trend around 2.5%, the unemployment rate goes up a half a percentage point.
[Pit stop: the price of benchmark crude went up something like $20 bucks over the past year, shaving one-half of a point off of real GDP growth, which was 1.5%, 2010q3-2011q3. So stacking rules of thumb, and remembering that the invisible hand itself can be all thumbs, that increase may have shaved half-a-point of off GDP growth, and added 25 basis points on the unemployment rate, which amount to 375,000 more unemployed people!]
