STEVE INSKEEP, host:
Anxiety about the war on terror is just one of many reasons that the price of oil keeps climbing, approaching $100 per barrel. The price of oil affects just about everything that's made, transported, eaten, or sold in the United States. And this morning NPR begins a series of reports about high oil prices.
In our first report, NPR's Jim Zarroli finds that cost has not affected the economy in the way many people expected - at least not yet.
JIM ZARROLI: Former Fed Governor Alice Rivlin says there's a real mystery in the economy these days.
Ms. ALICE RIVLIN (Former Vice Chairwoman, Federal Reserve Board of Governors): That's what is so surprising, that those of us who lived through the 1970s would never have predicted that the oil price increases of the last couple of years could have had so little effect.
ZARROLI: 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. Then interest rates go up, borrowing becomes more difficult, and growth slows.
But consider what's happened this year. Oil is up sharply just since late March.
Senator HILLARY CLINTON (Democrat, New York): Right now we're above $64 a barrel.
Unidentified Woman #1: ...in trading, crude hit a 10-month high in U.S. trade, settling at nearly $73 a barrel.
Unidentified Man #1: Crude oil prices hit $80 a barrel for the first time on record.
Unidentified Man #2: Crude oil touched $89 for the first time.
Unidentified Woman #2: The oil price continues to push into record territory. It's now up over 93 U.S. dollars a barrel. Traders in New York snapped up oil...
ZARROLI: Despite that, the economy grew at annual rate a 4.9 percent last quarter. That's been a surprised to people like Jay Bender. Bender is president of a South Dakota injection molding company. NPR interviewed him in January 2003, when oil was selling for $32 a barrel. At the time Bender was worried that rising oil prices would make raw materials more expensive.
Mr. JAY BENDER (President, Falcon Plastics Inc.): 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, grow our business in the future.
ZARROLI: We contacted Bender again recently. He says raw materials have risen, which has hurt his bottom line. But...
Mr. BENDER: I would say probably not as much as I thought that it would. And maybe what I was forgetting or not thinking as hard about is that when these costs go up, they impact my competitors as well.
ZARROLI: So how is the company doing now?
Mr. BENDER: We're doing well. I would say it's kind of the same scenario even as three or four years ago, that our sales are continuing to increase. Our top line is good. Matter of fact, we just set a sales record in August and then we broke it again last month in October.
ZARROLI: Bender says he survived by becoming more efficient, fighting back against hikes and raw material prices, and passing on some increases to customers.
Economist Ken Goldstein of the Conference Board says what's happened to Bender is happening across the economy. He says it may not look like it when you see all those SUV's everywhere, but the U.S. is more energy efficient than it used to be, and alternative fuels are more widely available.
Mr. KEN GOLDSTEIN (The Conference Board): When oil gets much more expensive than coal, than natural gas, then some bio fuels - we're able to make that switch today. We weren't able to do that earlier.
ZARROLI: Alice Rivlin says there's another reason the economy has survived price increases.
Ms. ALICE RIVLIN (New York Stock Exchange): We don't depend on energy very much because we don't depend on manufacturing as much. Services are less energy intensive.
ZARROLI: That being said, Ken Goldstein believes the days of relatively painless price increases are ending. A lot of things have gotten more expensive.
Mr. GOLDSTEIN: For example, the price of some of these sports drinks haven'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, became more expensive to the point of where they had to go for a price increase.
ZARROLI: Goldstein says there's always a lag between the time when oil goes up and the time its impact is felt on the economy.
Mr. GOLDSTEIN: This hundred dollar - nearly hundred dollar a barrel crude oil - that's still on the tanker; that hasn't even gotten to the refinery, let alone to the gas station on the corner.
ZARROLI: When it does, he says, gasoline could hit $4 a gallon. That's bound to be felt by consumers. Whether they stop spending will depend partly on other factors like how well the housing industry and the job market are doing.
But the past few years have shown that the economy can adjust to rising prices better than people once thought.
Jim Zarroli, NPR News, New York.
INSKEEP: Later today, on ALL THINGS CONSIDERED, we'll look at why oil costs nearly $100 per barrel, and you can find more on our Web site, npr.org.