The U.S. has a key advantage in weathering the Iran war-triggered energy shock that was missing in previous episodes of overseas tumult: an economy that has become substantially less energy-intensive.

Why it matters: Higher prices at the gasoline pump, for jet fuel and for diesel will no doubt hurt. But in relative terms, both the average household and the economy as a whole have more capacity to weather the hit than in the past.

The big picture: Over recent decades, the share of U.S. economic activity has increased in service industries that demand less energy. And the sectors that do require large-scale energy resources have become more efficient.

• At the household level, wages have risen rapidly enough that gasoline and other energy sources are a smaller share of household expenses than in many previous energy shocks.

Flashback: Consider 1991, when the Persian Gulf War created an oil price shock that contributed to a recession that cost President George H.W. Bush his reelection. At the time, the U.S. used 6.1 million barrels of oil a day.

• Now, America uses 7.5 million barrels of oil a day. That's up 23% in 35 years. But GDP has risen by about 400% over that same span.
• Any given dollar of U.S. economic output, in other words, requires substantially less oil than it did a generation ago.

State of play: For the average American household, gasoline costs were about 4% of total expenditures in 2024, per the Labor Department's Consumer Expenditures. That ratio was 5.4% in 2008, when energy prices were surging.

• Or to look at it differently, the chart above of how many minutes of work it takes to buy a gallon of gas tells the story.

By the numbers: If gasoline prices hold at their current levels of around $4 a gallon and average hourly earnings stay on their recent trend (a bit over $37 an hour), a worker would need to work 6.3 minutes to buy a gallon.

• While that's up substantially from February (4.7 minutes), it is still much lower than in episodes in the not-too-distant past.
• At the peak of the Ukraine invasion in June 2022, this metric of gasoline affordability reached 9.2. minutes.
• In 2011 during the Libyan civil war and the broader unrest amid the Arab Spring, it took 10.2 minutes of work for a gallon of gas. The modern peak, however, was 11.3 minutes in the summer of 2008, when oil prices reached all-time highs but wages were much lower than they are now.

Zoom in: So what kind of gasoline prices would it take to reach new highs relative to Americans' wages?

• If gasoline kept surging to $6 a gallon — double the prewar level and up another 50% from today's prices — it would be 9.6 minutes of work at the average wage.
• To match the 2008 high, gasoline would need to reach $7.05 a gallon.

The bottom line: The energy price pain is real — but for now, it isn't as bad, relative to Americans' earnings and overall economic position, as in those other episodes of strife in the Middle East.

Speaking before hundreds of Harvard students, Powell said the Fed is not yet at the moment when it needs to decide whether to "look through" the Iran war energy shock.

• What they're saying: "It's something we will eventually, maybe, face the question of what to do here. We're not really facing it yet because we don't know what the economic effects will be," Powell told economics students at Harvard this morning.
• "We feel like our policy is in a good place for us to wait and see how that turns out."

Powell said that the Fed has to consider the economic backdrop against which the shock is occurring. "The broader context is ... we've been coming down close to 2% [inflation], post-pandemic, but we've never actually gotten and stayed at 2%," he said.

• But the Fed chair added that, at least for now, Americans' inflation expectations remain "well-anchored beyond the short term," putting less pressure on the central bank to act now.
• Powell also joked that maybe the students in the audience should tell him what to do, since they had just completed a problem set on how the Fed should approach such a supply shock.

The intrigue: Powell was reluctant to give specific advice to his successor, Kevin Warsh, who is awaiting Senate confirmation.

• "I'll just say, in general ... it's very, very important to stick to your knitting and stick to the things that were actually assigned," Powell said.
• "There's always a time when an administration looks and says, 'It would be good to use [the Fed's tools] for something else,'" he said. "It happens all the time ... but we have to be careful to stick to what we're doing."

Answering a separate question from a student, Powell offered more insight into how he builds consensus at the Fed.

• "I think an underrated skill is in listening to people," he said.
• "If you listen to people, and you hear them ... and they understand that you're actually listening to them, and not just communicating at them — for most of the people, most of the time, that's going to be enough," he said, before adding: "And by the way, that's true on Capitol Hill."