On Tuesday, the price of oil set yet another all-time nominal high, leaping above $97/barrel. More importantly, it has just about reached its all-time inflation-adjusted high, reached amid the turmoil of the Iran hostage situation way back in 1980, the Associated Press reports:

Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

Back in 1980, sky-high energy prices sparked a wave of efficiency measures within corporate America and in households. Today, not so much. Detroit even insists that significantly raising auto fuel efficiency standards would be an "economic disaster." How can that make any sense at all, given oil prices are at all-time highs? Isn’t not taking serious efficiency measures the real economic disaster?

Meanwhile, U.S. consumers are shrugging off higher fares and flocking to airports, the Wall Street Journal reports. Why aren’t sharply elevated oil prices sparking more changes in behavior?

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A little more than a month ago — when oil had just passed the $80/barrel level — the Wall Street Journal ran a luminous front-page article called "How economy could survive oil at $100 a barrel."

I posted about it at the time, but it’s worth revisiting now that the economy is facing $100/barrel oil. Here’s the key paragraph:

For every extra dollar taken from drivers’ pockets at the pump in the form of higher prices in recent years, low-cost exporters from China and elsewhere have put roughly $1.50 back in the form of cheaper retail goods. Even at today’s near-record prices, U.S. households today spend less than 4% of their disposable income at the pump, vs. over 6% in 1980.

To me, this explains why everyone’s not freaking out about oil now: Sure, it’s at inflation-adjusted highs, but everything else is so much cheaper that it doesn’t cause as much pain.

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Let’s do some (very rough) arithmetic. At $80 a barrel, people were spending about 4 percent of their income at the pump. That means for gas prices to cause the pain in today’s economy that they did in 1980 and take up 6 percent of income, the price of oil would have to hit $120 (because 6 represents a 50 percent hike over 4, and $120 is 50 percent more than $80.) And until it does reach that level, people are likely to keep consuming like it’s 1999, rather than conserving like it’s 1980.

And why are consumer products so much cheaper now in real terms than they were back in ’80? I wrote about that in the above-linked post, but it’s worth repeating: We’ve essentially shuttered our domestic manufacturing base and availed ourselves of China’s vast reserves of labor and coal to keep ourselves clothed and entertained on the cheap. And we’ve invested those dubiously won savings in filling up our SUVs, even as oil prices surge.

I haven’t weighed in yet on the local vs. global debate raging on Gristmill, but I will say this: It’s hard for me to see how this brand of globalization has done ourselves, the people of China, or the world as a whole any lasting favors.

Given the specter of climate change, neoliberal self-congratulation about "pulling people out of poverty" rings particularly hollow — to speak nothing of the millions of Chinese and Indian farmers who have been plunged into poverty by those nations’ own neoliberal policies.

And another thing: If oil prices do keep up and hit the magic $120 level, what does become of the U.S. economy? We’ve got a negative savings rate (see figure 1A at the bottom of this Fed report ), a mounting middle-class debt crisis, a wobbling dollar (which, if it goes into free fall, could spark devastating interest-rate hikes), a banking sector in the throes of historic losses, and no manufacturing base to speak of.