The following editorial appeared in last Friday's Philadelphia Inquirer:
Gasoline prices in the double digits were too good to last. Sure enough, this week the average cost of a gallon of gas in America was in the mid-triple digits - $1.41 a gallon, to be precise.
Yet the economy is merrily rolling along. Automobile dealerships say they see little impact on sport-utility-vehicle sales. Even full-time inflation worrywart Alan Greenspan doesn't seem alarmed. That's much different from the oil shocks of the 1970s, '80s, and even the early '90s.
The only exceptions to the lack of public angst are those who rely on diesel fuel or heating oil. They're caught in a double whammy of higher crude costs and low stocks of the refined fuel.
But one thing is the same now as before. Higher oil prices mean that America is pumping billions of additional dollars overseas.
Why the relative social and political calm? Well, the cost of oil products accounts for only 3 percent of the gross domestic product, far less than the nearly 8.5 percent it accounted for in 1981. That means higher oil prices have less than half the economic impact. And gasoline prices remain well below historic highs in inflation-adjusted terms.
Even though gas prices may well head higher over the summer, few expect OPEC and other oil producers to push the world into a recession.
Oil price hikes now are driven by economics, not anti-Americanism. Ten months ago, oil was going for $10 a barrel and the producing countries were facing economic crises. So while they are happy to charge $30 a barrel for their oil, nations such as Mexico, Venezuela, Nigeria and Saudi Arabia recognize that it's not in their economic or political interest to force customers into penury.
Indeed, Thursday the Saudi oil ministry predicted that oil would be down to $25 a barrel by this summer.
All of the above is a good reason to ignore calls to tap into the strategic oil reserve. It was created after the 1974 oil crisis to protect the nation in the next crisis. America is far from that.
So far, the government is not letting domestic presidential politics interfere with a rational response to the oil price hike. Instead, it is doing the right thing, jawboning oil-producing states to loosen the supply and increasing aid to help the poor hit hard by higher home oil bills.
If government and the American people really want to attack the root of the problem, they should increase mileage requirements for SUVs, minivans and light trucks. That's a good way to reduce oil demand and cut prices over the long term.
One more point about the calm response of the public and the economy to the 40 percent hike in gas prices: Remember it the next time a government, state or federal, proposes a gasoline tax for a good cause, such as rebuilding the nation's crumbling roads or improving mass transit. Knee-jerk opponents are sure to decry the gas tax as inflationary and an insupportable burden on consumers. Ask yourself: How is it that we can quietly absorb a 40-cent-a-gallon hike to benefit Venezuela, but not a 5-cent one to rebuild a bridge or transit line in our community?
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