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

columnist for Reuters.)

By Jamie McGeever

ORLANDO, Florida, March 23 (Reuters) - No one likes

expensive oil, especially in the U.S., where driving, spending,

and energy-intensive economic activity are on such a vast scale.

But despite fears to the contrary, the average U.S. consumer has

never been better equipped to deal with $100-a-barrel oil.

U.S. households are the richest they've ever been in nominal

terms. They've rarely been better in relative terms either.

Unemployment is also historically low, and, perhaps most

importantly, gas and energy account for a historically small

share of consumption.

This may help explain why U.S. equities have outperformed

their global peers since the February 28 joint U.S.-Israeli

strikes on Iran triggered war in the Middle East, the closure of

the Strait of Hormuz and one of the worst energy supply shocks

in decades.

The S&P 500 and Nasdaq have lost around 5%

since then. That's a significant hit, wiping more than $3

trillion off the value of U.S. stocks. But the pain may be a lot

worse for businesses and households in Europe, Asia and emerging

markets, where benchmark indices are down 8-10%.

2% OF SPENDING ON GAS AND ENERGY

At an aggregate level, U.S. households appear fully capable

of withstanding oil at current prices. Gasoline and energy goods

represented only 2% of total consumer spending in the fourth

quarter last year, according to Bureau of Economic Analysis

data, the lowest percentage over the past 80 years, outside of

the pandemic-distorted period of 2020-21.

For context, nearly 3% of spending was devoted to energy

goods in 2022 when U.S. crude peaked at $130, and more

than 4% in 2008 when oil hit a record peak just under $150. It

peaked at around 6% in 1980-81.

True, the latest level of 2% will surely rise if the oil

price remains at elevated levels for a sustained period. But,

even then, most Americans should be able to handle it. As

Federal Reserve data last week showed, household balance sheets

have rarely been stronger.

Household net worth in the fourth quarter last year rose to

794% of disposable personal income, the highest level since

early 2022. Going back to the 1950s, U.S. household net worth by

this measure has only been higher in three quarters, all in the

pandemic-distorted 2021-22 period.

ENERGY INEQUALITY

Americans aren't immune to the impacts of the energy price

spike, however. The national average price of gas at the pump is

almost $4 per gallon, up 35% in a month, according to the

American Automobile Association.

The Energy Information Administration puts the average

slightly lower at $3.72, up 27% since the war broke out - the

highest in two and a half years.

Recall, however, that gas was consistently above $4 for six

months after Russia invaded Ukraine in February 2022, and hit $5

that June.

Still, it's important to remember that America suffers from

significant "energy inequality." Lower-income households direct

a far greater share of their spending to gasoline and energy.

A Fed study last year found that one in five U.S. households

are "energy burdened," meaning the average ratio of energy

expenditure to disposable income is 25%, compared with only 7%

for non-energy-burdened households. Most of these households are

in the bottom two quintiles of the income distribution.

For the Trump administration, it would be political suicide

to try to flag soaring energy prices as anything other than bad

news. That's especially true for a president whose approval

ratings are so low ahead of midterm elections in November that

could see the Democrats take both houses of Congress.

Moreover, there may be more pain to come. Higher oil can

bump up costs throughout the economy, meaning transportation,

manufacturing, fertilizer, plastics, chemicals and food could

all get more expensive.

This is why Trump is scrambling to get oil prices down, and

earlier on Monday he said military strikes against Iranian power

plants and energy infrastructure will be put on hold.

To be sure, this is an extremely fluid situation, and

Americans' resilience could quickly wilt, especially if oil

surges even higher. But for now, fears that $100 oil will break

the back of the U.S. consumer seem overblown.

(The opinions expressed here are those of Jamie McGeever, a

columnist for Reuters)

Enjoying this column? Check out Reuters Open Interest (ROI),

your essential new source for global financial commentary.

Follow ROI on LinkedIn, and X.

And listen to the Morning Bid daily podcast on Apple,

Spotify, or the Reuters app. Subscribe to hear Reuters

journalists discuss the biggest news in markets and finance

seven days a week.