Who said anything about damaging the economy.
I said there would be a cut off price for buying fuel.
$2 / lt is a lot to pay for petrol, given our distances between towns.
That would get you about 8 km's down the road, or 4 km's in a 4 wd.
$2 would put considerable pressure on transport costs which would cause everything to rise.
I say it would cause a lot of stress.

579,

Higher energy costs (petrol, electricity whatever) do damage the economy; as costs rise we have less disposable income. Less to spend equals economic contraction and a slow down in growth.

If petrol gets to $2 a liter then people will cut back their other spending. $2 a liter would double my transport costs per week but I could still afford it. It it gets to $4 or higher then Huston, we have a problem

For those that have been following this thread, the link below is to
an article by Richard Heinberg on collapse or the alternative words
that are less frightening.

http://www.energybulletin.net/stories/2012-02-16/fight-century

I think you will find it interesting. Part way down there is a blue
link to an article by George Soros. Most of you I think will know who
he is, you know the man who broke the Bank of England.

Re the effect of high fuel prices, in 2007 as they were climbing food
prices rose with the oil price.
People, in the US, were faced with paying the mortgage, food or petrol
so they could go to work. Guess what got dropped.
There was an interview on the BBC radio last night about the unemployed
in America and their kids lack of food.
At a school where kids go to school hungry the interviewer noticed
one little girl had her head down, on talking to her the
interviewer discovered she had a rat for dinner the night before.

Still think it is not a problem in the tent cities around US cities ?

.... all of which is due to peak oil?

Yes Rhian, the current economy in the US was caused by the rapid increase in
fuel prices in the US, which caused the housing bubble to collapse
putting millions on the street.

It started after crude oil production stopped increasing in 2005-2006
and the price increased during 2007 and finally reached $147 in the US.
The oil price crashed to $36 a barrel.

Two months later the banks failed and Wall St had to be bailed out.
Then all the CDOs fell apart. Then Wall St crashed.
When oil prices have risen previously it has always caused a recession
shortly after. Then recovery restarts with a lower oil price and away
we go again.
Unfortunately this time as recovery started the oil price did not
just go up to $40 or $50 but went right on to $100 because there was
no longer a surplus.

Finally Greece's chickens came home to roost and are all surprised
that no one in Europe can repay their loans. No GDP no growth.

All this is well documented if you want to look for it.
How do we get out of it, I doubt if anyone knows, but the article
by Richard Heinberg that I gave the link for has a stab at four possibilities.

579 et al;
Following our recent discussion on cost of car usage I have just come
across this article from Wales;

http://tinyurl.com/7grbeop

It does appear that $2 plus petrol does cut back on car usage.
There was another report from the UK that said bicycle usage was up 13%.
Gives a new meaning to "on ya bike !".