The global oil benchmark flirted with the $80-a-barrel level again on Tuesday, underlining concerns that an unexpectedly strong crude rally could eventually begin to weigh on economic growth.

The combination of renewed U.S. sanctions on Iran, potential sanctions on Venezuela, a rising geopolitical risk premium, strong demand and other factors have made talk of $100 crude sound less outlandish. Indeed, some analysts argue that the backdrop now leaves the market more open to potential price spikes.

Read:Here’s what surging oil prices mean for the stock market

So what if oil did climb back to triple digits for the first time since 2014? Economists led by Arend Kapteyn at UBS laid it out in a wide-ranging note on Tuesday.

In it, they observe that the rise in Brent UK:LCON8 from around $60 a barrel a year ago to close to $80 makes for the 11th largest price spike (see chart below) in 70 years (crude’s initial 2017 jump ahead of a February pullback was the 10th largest). West Texas Intermediate US:CLN8, the U.S. benchmark, was trading below $73 a barrel Tuesday afternoon.

They note, however, that $80 oil today means “something very different than it did for our parents.” Measured in constant dollars, the spike, while large, is smaller than the spikes that preceded past recessions. Moreover, the world is more fuel efficient, which means the world needs fewer units of energy to produce one unit of gross domestic product.

For the U.S., there is also the matter of the shale revolution, which has propelled the country back into the top ranks of global producers. The U.S., however, does remain a net oil importer. The UBS economists go into detail:

The US is still a net oil importer, even though the oil balance is rapidly improving. In theory that should mean that higher oil prices lead to a transfer from consumers to domestic and foreign producers. The domestic transfer is in principle neutral from a growth perspective if volumes are unchanged (domestic producers gain what consumers lose), but because of the additional transfer abroad, the net impact on growth is negative. However, volumes are not necessarily constant, the move in oil prices from below $30/bbl up to where we are now has brought with it a surge in equipment and structures investment as well as substantial employment gains. As a result of this investment, US production surged from about 9.6 million barrels per day to over 10.7 million over the last six months. Once you factor those effects in the growth effect for the US becomes net positive. There are, however, threshold effects (and that GDP elasticities are not constant): the volume effects on the production side depend on where spot prices are vs break-even prices; at current oil price levels we assume the incremental production brought on line starts to diminish.

If the U.S. is included among oil producers rather than consumers, the UBS model finds that a 10% oil price rise leads to a weighted average GDP growth increase of 15 basis points, or 0.15 percentage point, for producers and a drag of 9 basis points for consumers. Since consumers have a larger weight (66%), the two roughly cancel each other out, leaving only a 1-basis-point net drag on global growth.

They found, however, that a $100-a-barrel scenario would take 16 basis points off global growth, with producers contributing 5 basis points and consuming countries subtracting around 21 basis points. In part, that’s because oil prices at triple digits would get “somewhat less” of a volume response from marginal producers.

The bottom line is that as oil gets closer to $100 a barrel, the net impact of higher oil prices is again becoming a net negative.

“The global sweet spot — where oil prices may have positively contributed to global growth — seems to be somewhere between $50 and $70 a barrel,” they wrote.



