(the old rule of thumb was a 10% rise in the price of oil worked through to a 1% rise in CPI, now it's more like 20-25:1)
Here's a slightly different angle from Real Time Economics:
The price of oil is once again on the rise, along with fears that instability in Iraq could threaten the nation’s oil production and send global prices soaring.
A story in today’s Journal shows the U.S. may be more insulated from the hazards of the international oil market than in the past. But rising oil prices still have ripple effects on the U.S. economy. Here are some handy rules of thumb we worked out with Deutsche Bank chief U.S. economist Joseph LaVorgna to monitor how this could play out.
The Hamilton-to-a-Quarter Rule
The price of gasoline at the pump is closely related to the international price of oil. An increase of $10 in the price of oil tends to lead to an increase of 25 cents in the price of gas (a bank note with Alexander Hamilton to a quarter).
In fact, over the past six years, if you divided the price of oil by 40 and then added 75 cents you’d get pretty close to the national average price of gasoline.
So if oil trades at $120, it’s a decent guess that the national average price of gas will be around $3.75 (that is, $120/4 + $0.75). If oil falls to $100 a barrel, it’s a good guess that gas will head toward $3.25. This isn’t accurate enough for a professional oil trader, but it’s good enough to impress friends.
The One Penny-to-One Billion Spending RulePreviously:
From Mr. LaVorgna’s calculations, a one-penny change in the price of gasoline leads to roughly a $1 billion increase in household energy consumption. So if gas prices rise by 25 cents, that’d be a $25 billion increase in household energy consumption....MORE
Credit Suisse on Oil Inflation/Deflation And The Economy
Is the US Economy Getting More Energy Efficient or Not?"
I just love this LLNL graphic: