The price of oil affects just about everything that is made, transported, eaten and sold in the United States. But with oil approaching $100 a barrel, the impact on the U.S. economy has been less than many analysts expected.
Time and again, economists from Alan Greenspan on down have warned that higher oil prices are inflationary. They make it more expensive to drive, to buy an airplane ticket and to manufacture anything from air conditioners to zippers.
Despite that, the economy grew at an annual rate of 4.9 percent last quarter. That's been a surprise to Jay Bender, president of a South Dakota injection-molding company. NPR interviewed him in January 2003 when oil sold for $32 a barrel. At the time he worried that rising oil prices would make raw materials more expensive.
"That's going to be a challenge and if it does squeeze our bottom line too hard, it will have an impact on our ability to invest in capital equipment and grow our business," Bender said in 2003.
Today, he says, the cost of raw materials has increased, but "I would say probably not as much as I thought it would and maybe what I was forgetting [in 2003] ... is when these costs go up they impact my competitors as well."
So, how is his company doing now?
"We're doing well," he said. "I would say it's the same scenario as three or four years ago that our sales are continuing to increase, our top line is good, we just set a sales record in August and we broke it again last month in October."
Bender said he has survived because by becoming more efficient, fighting back against higher prices and passing on some increases to customers.
Economist Ken Goldstein of The Conference Board, which compiles the Consumer Confidence Index, said what's happened to Bender is happening across the economy. He said it may not look like it when you see all those SUVs but the U.S. is more energy efficient than it used to be and alternative fuels are more widely available.
"When oil gets much more expensive ... some biofuels," become more cost effective, Goldstein said. "We are able to make that switch today. We weren't able to make that earlier."
Federal Reserve Governor Alice Rivlin said there is another reason the economy has survived price increases — less manufacturing.
"We don't depend on energy as much because we don't depend on manufacturing as much," Rivlin said. "Services are less energy intensive."
Goldstein believes the days of relatively painless price increases are ending. A lot of things are getting more expensive.
"For example, the price of some of these sports drinks hadn't increased in seven years. It did this summer and precisely because the price of transporting that stuff by truck to the supermarket to the grocery store got more expensive to the point where they had to go for a price increase," he said.
Goldstein says there is always a lag between the time when oil goes up and the time its impact is felt in the economy.
"This $100 — near $100 — a barrel crude oil, that's still on the tanker," he said. "That hasn't even gotten to the refinery, let alone to the gas station on the corner."
When it does, he said, gasoline could hit $4 a gallon.
That's bound to be felt by consumers. Whether they stop spending will depend partly on other factors, such as how well the housing industry and the job market do. But the past few years have shown that the economy can adjust to rising prices better than people once thought.