In Times Like These

“Food and energy companies have learned a lot since the 1970s about how to deal with public indignation over soaring commodity prices. Now, all that knowledge may be put to the test.

“Crude-oil prices have tripled since 2004, pushing gasoline to more than $4 a gallon in some markets...

“Archer Daniels Midland Corp., the country's largest ethanol producer, is fighting to avoid being portrayed as the villain in rising farm-product prices…

“Energy and food companies may spend less time in the spotlight today because their output commands a smaller share of people's pocketbooks than in decades past. Gasoline, for example, currently accounts for about 5.4% of household budgets, down from 7% to 8% in the early 1980s.

“For the first half of the 20th century, food spending accounted for at least 20% of Americans' disposable income, according to the Agriculture Department. That percentage dropped to 13.6% in 1974 and has been slightly below 10% this decade. Indeed, as the U.S. becomes more prosperous, extra household earnings are more likely to be spent on flat-panel televisions, casino junkets or college tuition than on food…

“Adam Sieminski, chief energy economist at Deutsche Bank, has been trying to calculate how much oil prices would need to rise for consumers world-wide to feel as alarmed as they did in 1980, when crude soared to a then-unheard-of price of $40 a barrel.

“If one adjusts for constant dollars… oil at $100 a barrel today would be comparable, he says. But if one also adjusts for the somewhat smaller bite oil takes out of personal income -- as people have become more energy efficient -- it would take a price of $135 to $150 a barrel to produce the dislocations caused by the 1980s price spike.

“Another new factor at play: the public's increased familiarity with commodity-price volatility. The sudden price run-ups of the 1970s were especially jarring because they came after at least two decades of relatively stable prices. People who had become very accustomed to paying about 29 cents a gallon for gasoline suddenly saw prices increase by that amount in a matter of months.

“By contrast, modern consumers are all too familiar with gyrating prices. We may grumble when prices soar. But we don't regard each spike as an assault on our general sense of order.”

(“Fat Profits Test Public-Relations Skills.” George Anders. Wall Street Journal: April 30, 2008. pg. B.1)

AND EVERY GENERATION feels that it is living through times of unprecedented dislocation. So once again and again, it is our feelings that drive policy, not the bare facts.

See, think, feel, act.