LONDON, March 11 (Reuters) - U.S. stock market indexes

have weathered this month's oil shock well so far because

investors expect only a glancing overall GDP hit from higher

energy costs. But that resilience masks a potentially toxic

shift of income from households to "Big Energy" - and packs big

risks in an election year.

With uncertainty still rife about the extent and length of

the Iran war, sharp and volatile spikes in energy prices have

left oil and natural gas costs looking structurally higher over

the coming year. Worries about food prices are creeping in too,

asfertilizer shipmentsare also being snagged in the Middle East

Gulfregion.

As inflation is spurred once again, the chances of U.S.

interest rate cuts this year have been reduced or pushed back.

None of that sounds like good news for the U.S. economy or

consumers overall, at least not until you make calculations

about America's new-found position as a net exporter of energy.

For the producers and exporters of all that domestic U.S.

oil and natural gas, this is a big windfall. And unlike their

competitors in the Middle East or elsewhere, there's no security

threat or blockage in getting their product to market.

Carlyle strategist Jason Thomas points out that the U.S. ran

an annualized energy trade surplus of nearly $100 billion in the

last 12 months and the surge in oil and gas prices will only

increase that substantially.

"Higher gasoline prices still could be conceived of as a

'tax' on U.S. consumers, but that's offset today by an increase

in domestic revenues that didn't exist when the energy price

shock of 2007-08 shaved over 1% from U.S. GDP," he wrote,

pointing to the period in which oil and gas prices roughly

trebled in 18 months.

But with the U.S. now a net exporter of petroleum products

for the first time since the 1950s, assumptions of a

2007-08-style GDP hit - one that could halve U.S. growth on a

comparable oil price surge today - now look wide of the mark.

GLANCING BLOW

Apollo Global Chief Economist Torsten Slok's "ready

reckoner" - a quick rule-of-thumb guide built from Federal

Reserve models - shows that even if crude oil stays above $100 a

barrel through 2027, the shock's impact fades over time and

leaves only minor aggregate impacts on the macro economy.

While the net impact on headline inflation could be as high

as 0.7 percentage point, the effect on real GDP, unemployment

and core inflation is just 0.1 point, he showed.

"The U.S. is a net oil exporter and energy efficiency has

improved significantly over the years - meaning the economy

burns less oil per unit of GDP compared to historical levels

(and) helps dampen the overall negative impact of price spikes."

Not everyone thinks it would be such plain sailing if the

shock persists.

Morgan Stanley estimates that if a 25% oil price jump driven

by a supply shock lasts four quarters, real GDP would be about

1.5% lower, with most of the damage occurring in the first

three.

But the issue is that GDP can hold quite well even though

everyone seems to acknowledge that higher energy prices, and

inflation more broadly, act as a tax on households.

ELECTION YEAR PRESSURES

If the impact of a sustained oil shock were to have the

minimal GDP impacts some suggest, then all that's really

happening is that money is being redistributed to domestic

energy companies from already stretched households.

Government could step in to subsidizeand cushion households,

but that simply shifts the burden onto an already stretched

Treasury - and ultimately back onto the public.

The political toxicity of high U.S. headline inflation -

even if the Fed focuses on core rates that strip out energy and

food - has been well documented since the COVID-19 pandemic.

In a midterm election year, sensitivities in Washington will

be even higher, which helps explain why Wall Street seems

convinced the conflict will be limited and that it should buy

the dip as GDP sails on regardless.

But a raid on household wallets that just ends up in

domestic oil and gas firms' coffers might not go down well at

the polls, especially if voters believe the oil surge was

triggered by U.S. military action in the first place.

(The opinions expressed here are those of the author, a

columnist for Reuters.)

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