Can High Energy Price Cause Inflation?

I met Gaolan this morning at the neighborhood park. He was with his family. I was with my family.

While we were there, Gaolan was asking me about my comments about the current high oil price. His concerns are that the high oil price will pressure consumers to shift their spending from regular items to gasoline. So that the high oil price will produce an inflation or economic downturn.

I think this is a current state of minds in the United States. However, I think the high oil price will not affect the current economic expansions at all. First, the high oil price is just changing the wealth distributions rather than destroying values. The high oil price creates new economic activities in the energy industry. So there are more jobs. Before the high oil price, let's assume that there were 100 consumers; each of them spends $100. The total economic activities are $10,000 after the high oil price, now there are more consumers. Let's assume now there are 101 consumers and each of them spends $99. The new economic activities are now $9,999.

Secondly, the high oil price cannot change its course by itself without obvious economic impacts. I do not know how high the oil price will go. I do expect the trend will not stop until some detrimental economic impacts are everywhere.