Thankfully, the Economy Doesn't Run on Gas

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WASHINGTON: Well, the age of dirt-cheap gas was nice while it lasted. According to the Energy Department, a gallon of regular unleaded gas now averages $1.14 nationwide. That's up 2 cents from just a week ago and up 23 cents, or 25 percent, from six weeks ago, when the inflation-adjusted average was among the lowest in America's history. That's great news for OPEC countries and the rest of the oil-producing world -- it means those production cuts, buttressed by increased seasonal demand, are indeed pushing up the price of crude -- and a real bummer for vacationers. Prices at the pump are expected to peak right in time for Memorial Day. But macroeconomists are resting easy.

"It used to be that a big increase in energy prices would be a big inflation worry," says TIME senior economics reporter Bernard Baumohl. "But the U.S. economy is a lot different than it was in the 1970s. It's less dependent on heavy manufacturing and more dependent on retail sales and technology." Costlier fuel doesn't translate as neatly into higher-priced goods, and that means the Fed won't have to worry about inflationary pressures -- which are still nearly nonexistent -- unless things really get out of hand. "If the price of crude stays in the high teens" (it's around $16 now), "inflation may edge up to 1.8 percent over the summer," Baumohl figures. And as anyone who lived through the Carter years can tell you, that's hardly inflation at all.