Consumers don't mind

oil prices

Knight Ridder Newspapers

WASHINGTON -- Oil prices are soaring, but curiously, no one seems to care.

Last January the average global price for a 42-gallon barrel of oil was $11.11. Last week it hit $25.94 -- an increase of 133 percent.

One year ago the average retail price of regular gasoline was 94.5 cents per gallon. This week it was $1.26 -- a 35 percent hike -- and since October gas prices have been at their highest level since December 1990, just before the Persian Gulf War.

Not all that long ago, when the price of oil quadrupled in 1973-74 and again when it doubled in 1979-80, alarmed Americans bought small foreign cars for fuel efficiency as the U.S. economy slumped into punishing recessions. Indeed, the nation's last recession, in 1990-91, also was spurred by an oil-price spike stemming from Iraq's invasion of Kuwait.

This year, however, even as oil prices have doubled, gas-guzzling sport utility vehicles remain Americans' cars of choice and the nation's white-hot economy is booming along unfazed.

What is going on? Why is the price of oil skyrocketing -- and why doesn't it matter anymore?

The answers, experts say, illustrate profound changes in the global and U.S. economies. Perhaps most significantly, in 1980 oil was responsible for 8.5 percent of total U.S. economic output (the gross domestic product, or GDP). Oil is essential to transportation, electricity, heat and the manufacture of everything from plastics to chemicals and pharmaceuticals.

Today, however, with the computerized economy replacing smokestack industries as the primary engine of U.S. jobs and growth, oil accounts for less than 3 percent of GDP.