As oil climbs to near $70 a barrel, some economists are beginning to worry that rising oil prices, sustained over a period of time, could scotch economic growth, raising the inflation rate, which would force the Federal Reserve to increase interest rates at a faster pace than planned.

For the moment, we appear to be able to absorb this nearly tripling the cost of oil since 2016, when it was $26 a bbl.  And the blessing in disguise with increased oil prices is the recovery of the energy sector, which was decimated by the huge glut of oil on the market.

But the glut is now gone.  The question for many economists is, how long we can maintain strong growth with rising prices and interest rates?

Wall Street Journal:

For now, some investors say oil prices are lodged in a range that could benefit the U.S. economy by bolstering the recovering energy industry without curtailing demand.

Yet even with the economy chugging along, rising oil prices dredge up fresh concerns.  If crude continues to move higher, it could begin to stifle economic growth.  Higher consumer prices for gasoline and other energy products act like a tax, while pushing inflation higher and increasing pressure on the Federal Reserve to raise interest rates more aggressively.

That, in turn, could slow growth and weigh on the stock market, which has already been knocked around by trade tensions, rising bond yields and recent bouts of volatility.  Inflation concerns pushed the yield on the 10-year Treasury note to the highest since 2014 on Friday, while major U.S. stock indexes closed lower, wiping out much of the recent gains after a string of upbeat earnings.

"Nothing can suck cash flow out of the economy faster than rising oil prices," said Joseph LaVorgna, chief economist for the Americas at Natixis.

When oil prices fell below $40 a barrel, financial distress from the energy sector started to spread, said Jason Thomas, director of research at the Carlyle Group.

But if oil prices continue rising, they could boost inflation expectations, which would raise bond yields and the cost of financing.

"We're starting to move out of that Goldilocks zone," Mr. Thomas said. "Certainly $10 to $15 a barrel more there starts to be this drag."

OPEC, once moribund and ineffective compared to its dominance in the 1970s and '80s, is largely responsible for the rising price of oil.  Its members have cut production to the bone, encouraging non-OPEC members like Russia to do the same.  But it remains to be seen how long this coordinated effort to keep supplies artificially low will work.  The recovering energy sector in the U.S. means that shale oil-producers, forced to cut back production when prices were low, are gearing up to take advantage of the high prices and vastly increase their output. 

And OPEC nations are not nearly as united as they used to be.  Already, Iran is making noises about increasing production, and you can bet thatother OPEC nations are doing the same. 

The biggest reason why rising oil prices will not damage the economy severely is that the U.S. is now the number-one producer of oil in the world.  U.S. oil exports are taking up some of the slack in the economy and will almost certainly act as a shock-absorber to prevent the kind of economic downturn we saw in the 1970s.

Still, rising gasoline prices could negate at least some of the tax cut.  Politically speaking, that's not good news for Republicans or the president.