Food, not oil, may prove to be the bigger threat to global growth, with the pain falling disproportionately upon the developing economies that powered the latest economic recovery.
Oil market investors are pricing in only a small risk that Middle East unrest spreads to top oil producer Saudi Arabia -- an event that would instantly catapult oil to the top of the global economic risk list.
Assuming Saudi Arabia's oil flows unimpeded, the blow to global consumer spending looks relatively modest. Food prices, however, are expected to remain elevated for some time, which puts more pressure on household budgets.
At the moment, the increase in food prices is much more of a concern, Thomas Helbling, an advisor in the International Monetary Fund's research department, told Reuters Insider.
Treasury Secretary Timothy Geithner echoed that view last week, pointing out that rich nations could tap strategic oil reserves if needed, while food prices will remain high for a long period of time.
Retail sales figures coming this week from the United States, China and Britain will shed some light on how consumers coped in February, when violence in Libya drove energy prices sharply higher.
Economists polled by Reuters expect yet another month of explosive growth in China, with retail sales up 19.1 percent year-on-year. For the United States, the consensus view shows a month-on-month sales gain of 1 percent, which would be far faster than in January.
To be sure, some of that strong growth reflects more money spent on fuel in February, and if oil prices remain elevated they will tax consumption.
WHICH CRACKS FIRST?
So far, however, U.S. consumer confidence has risen right along with gasoline prices, according to the Thomson Reuters-University of Michigan Surveys of Consumers.
Richard Curtin, the survey's director, said if oil prices continue to climb, it will be confidence that breaks first.
That aberrant trend is unlikely to continue, Curtin said. Either gas prices will begin to decline or, more likely, expectations will fall.
If investors are right, however, oil prices will top out around $106 a barrel and then drift lower next year.
Deutsche Bank economist Peter Hooper said a mild oil shock that pushes prices no higher than $110 a barrel would trim 0.4 percent off global economic growth. That would be a relatively modest hit, considering that economists in a Reuters poll expect 2011 global growth of 4.2 percent.
If oil hits $150 a barrel -- Hooper puts just a 10 to 15 percent probability on that -- it would wipe 2 percentage points off global growth.
Food prices, on the other hand, are widely expected to continue rising, partly because of a recent spate of crop-damaging weather, but also because rising living standards around the world have pushed up demand for meat.
That cost will fall most heavily on poorer countries, where food takes up a bigger share of household budgets. World Bank President Robert Zoellick told Reuters last week that politicians in rich countries did not always recognize the political and economic challenges that higher food prices pose to developing countries.
If food costs start eating into developing economy growth rates, the rich world will have to take notice. Emerging and developing economies are expected to grow at a 6.5 percent clip this year, according to IMF estimates. Advanced economies will likely grow at just a 2.5 percent pace.
The global economy needs emerging markets' strength. But everyone has to eat.
(Editing by Dan Grebler)