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Is it all relative? Maybe oil prices aren't so bad, after all.

Yes, gas prices have soared, but they're still 34 percent below 1980 levels. Housing and baseball tickets are another story.

By Kris AxtmanStaff writer of The Christian Science Monitor / April 19, 2005



HOUSTON

We groan when our grandparents go on about Coca-Cola costing only a nickel in their day. How did things become so much more expensive, they always want to know?

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Here's the short answer: With inflation factored in, that same bottle of Coke during World War II would cost roughly what we pay for it today. Eggs, milk, and bread now cost less.

But when the subject of gasoline comes up, we sound like our elders. How did it get to be so much?

The fact is, oil is still relatively inexpensive. By one measure tracked by Dow Jones, we are still far from matching an April 1980 spike in US oil prices. The $39.50 per barrel price that month exceeds $90 in today's dollars.

We remain a long way from that, with oil easing below the $50 mark in trading Monday.

That's not to say that energy costs aren't hitting families and corporations in the pocketbook. Even as oil prices have softened in recent days, there's been new concern about energy dampening economic growth. But a broader view - looking at oil over a longer period and against other goods and services - puts the impact in a less dire perspective.

"Gas is actually cheap right now," says Timothy McMahon, editor of InflationData.com. "Up until a year ago, oil was at a historic low, and they were giving this stuff away. And so to go from $20 a barrel to $50 a barrel looks like a big increase in a small period of time. But if it were spread out over those 25 years, nobody would say a thing."

Even with the rising costs, economists say, energy still makes up a small percentage of a family's budget, about 4 percent. That's half what it was in the early 1980s.

In fact, lots of goods and services have gone down in price during that time, including clothes, electronics, and food. But don't dismiss your grandparents that quickly. Certain things like new cars, new homes, healthcare, and a college education are considerably more expensive today.

AAA, the nation's largest organization for motorists, is quick to point out that most families try to stick to some kind of household budget and do feel the pinch when oil prices fluctuate.

"AAA's view for a long time has been that inflation-adjusted prices for energy are probably helpful to economists and policymakers, but not for the typical family that has to pay a gasoline credit-card statement every month," says Geoff Sundstrom of AAA. "The prices are paid with real dollars or current dollars."

Consumers seem to be taking the rapid rise in oil prices in stride. Many aren't cutting out that weekend movie to make up for the damage at the pump.

Jeff Stepanik, for instance, says gas prices over $2 a gallon have not had any impact on his family's budget (or lack thereof). He is still tinkering around with motorcycles and his wife is still happily hitting the mall. "We don't live any differently than we did before," says the Houston account manager. "It's not like we're going without a meal because of gas prices." But he is considering a life with routinely higher gas prices - as witnessed by his family's most recent purchase.

Three weeks ago, Mr. Stepanik sold his wife's "gas-guzzling" Ford Expedition and bought a hybrid Nissan. "This vehicle made more financial sense, because we are not going to stop driving," he says.

He estimates that gas prices would have to exceed $10 a gallon before he considers changing his driving patterns.

That's not an uncommon attitude in the United States. Even during the oil embargo of the 1970s, it took a while before consumers began buying smaller, more fuel-efficient cars or moving closer to where they worked.

"It's going to take a lot higher gas prices for people to consider using mass transit or carpooling again," says Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas. "It is really difficult for Americans to give up the freedom they have with the automobile."

He sees it happening perhaps first with the younger generation, who are more shocked by the rising prices because they have grown up with cheap gas. For instance, he knows a college student who took a lower-paying summer job because it was 20 miles closer to where he lived.

"They are doing the math," says Mr. Baxter.

But Michael Solomon, consumer behavior expert at Auburn University in Alabama, calls the frenzy over rising gas prices "a tempest in a teapot," considering the amount of money people spend on small indulgences.

"The same people who are complaining about gas prices don't blink when they pay $3.50 for a latte," he says. "That's different somehow."

What's different is the changing perception of certain goods and services, he says. The necessities, such as food, clothing, and energy, are supposed to stay relatively constant, so that every year consumers are able to afford a little more of the "good stuff."

"We learn that a loaf of bread is $2.29 and we base our expectations on that. The usual becomes the right," says Dr. Solomon. "But the 11th Commandment is not that bread shall be $2.29."

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