Fears that rising oil prices will strangle the economic recovery and produce a double-dip recession appear overblown.

A barrel of oil on the New York Mercantile Exchange recently fetched $78.55, 4.2% below the 52-week high of $82 reached last week and 46.7% below the high of $147.27 reached in July 2008.

Some analysts fear that oil at $80 a barrel or above will slow, and perhaps snuff the recovery. But sharply higher prices appear unlikely in the immediate future.

On Thursday, ExxonMobil (XOM), the world’s largest oil company, and Royal Dutch Shell (RDS-B), the second-largest, reported significantly lower earnings due to reduced demand. Neither company expects demand to increase significantly anytime soon. Slack demand will likely hold prices in check.

ExxonMobil said its earnings fell 65% while Royal Dutch Shell reported a 62% drop. In mid-day trading, ExxonMobil’s stock fell 1.6% and Shell lost 1.1%.

Peter Voser, Shell’s chief executive officer, said the outlook remains “very uncertain” in view of estimates that demand for crude oil will decline the most this year since 1980.

Rex Tillerson, ExxonMobil’s chief executive officer, cited “ongoing global economic weakness and reduced demand” for the earnings drop.

Earlier this week, ConocoPhillips (COP) said its second quarter profit fell 76% and BP (BP) reported a 53% decline. Chevron (CVX), the second-largest US oil company behind Exxon, is scheduled to report earnings Friday.

In the US, demand for oil remains bearish with unemployment near 10% and expected to go higher before improving. The weak dollar and fear of inflation have led some to bet on oil as a hedge against the falling greenback, driving the price higher.

Last month, the Organization of Petroleum Exporting Countries said it would leave production quotas unchanged at 24.8 million barrels a day. OPEC produces about 40% of the world’s crude oil. Last year, the cartel slashed production by 4.2 million barrels a day in an effort to avoid a global oil glut and avoid falling prices.

Reduced earnings may mean less money devoted to exploration and that could result in shortages – and higher prices – long after the economy has recovered. However, ExxonMobil says production in the third quarter of 2009 increased 3% over the same period a year ago thanks to four major projects in Qatar. Shell says it’s developing reserves in the Middle East, Brazil, and the Gulf of Mexico and Canada in an effort to boost production after six years of falling output.

Long term, Exxon has invested in Synthetic Genomics, a company seeking to develop the next generation of biofuels from photosynthetic algae.

On Thursday, the US Commerce Department said the nation’s economy grew 3.5% in the third quarter, the first expansion in four quarters. The economy got a boost from the recently ended Cash for Clunkers program that boosted car sales and an $8,000 tax credit for first-time home buyers. That credit is scheduled to expire at the end of November unless Congress votes to extend it, something the Obama administration advocates.

Tepid consumer spending due to high unemployment appears to be the immediate threat to the recovery. Last week, the US Labor Department said 530,000 workers filed for jobless benefits. That suggests recovery in the job market will be slower than hoped. If so, consumer spending, which represents about two-thirds of gross domestic product, almost certainly will be soft.

A weak job market suggests there won’t be a quick recovery in demand for oil and prices won’t spike upward. If there is a double-dip recession, oil won’t be the culprit.