US economy risks recession from $100 oil

Oil prices at $100 a  barrel would push the US economy into recession, according to a  survey of 195 US economists released today.

Terrorism is seen as the biggest threat to the world's largest economy, followed by high energy prices and inflation, said the twice-yearly survey by the National Association for Business Economics (NABE).

Most of the respondents also said that Federal Reserve policy is about right, after the US central bank this month called off a  long-running campaign of interest rate hikes.

'NABE members believe that oil prices above $100 a  barrel would probably cause a recession, but don't believe they will go that high,' said NABE president Stuart Hoffman, the chief  economist at PNC Financial Services. 'They see little prospect of significant  substitution of other technologies for oil in the next decade,' he added.

Some energy analysts have speculated that UN sanctions against major crude producer Iran could drive oil prices up over $100 a barrel, from the mid-$70 level now. Iran says it is developing peaceful nuclear energy, but is suspected by the US and European countries of pursuing a secret drive to build atomic weapons.

The NABE survey found that terrorism was seen as the biggest short-term problem facing the US economy, identified by 34% of respondents, up from 26% in the last poll in March. Energy was the biggest fear of 29% of respondents, up  from 23%. Inflation fears moved into third place, ahead of  the mammoth US trade deficit.

Some 71% of respondents said current monetary policy is about right, but the economists split on where the Fed should go next. A total of 29% wanted further rate hikes, 17%  wanted cuts, and 53% preferred to leave rates at their current level.

At an August 8 meeting, the Fed kept the benchmark US interest rate steady at 5.25%. It was the first time since mid-2004  that the central bank had not increased borrowing costs.