Even though prices at the pump are at levels not seen for a few years, stocks continue to rise. That might seem a bit odd to someone, but it got me thinking about a few reasons why this might be happening.

First, let’s not forget there are a number of oil companies, like Exxon Mobil and Chevron, for example, that have large market values who are benefiting from the spike in oil prices. This in turn has helped take the DOW and S&P 500 higher.

Next, the increase in oil prices is an indication that world demand is picking up, leading investors to believe that the economic engine is heating up, leading to higher stock prices.

In addition, our society has now gotten to the point of acceptance; that is, no one who has paid any attention the past few years thinks in terms of $2 gas prices any more; that’s ancient history. Instead, $3-4 is more the norm. And even though seeing prices north of $4 in certain areas brings up memories of the fairly recent past that may be unpleasant, it’s nothing new; we’ve been there, done that. The shock value just isn’t as great.

Let’s also remember that more people are working now than when gas prices were at their most lofty levels. Thus, the ability of a larger number of consumers to handle the recent rise in prices.

Obviously, there could be a tipping point where the cost of a gallon of gas begins to have a major impact on the overall economy. But, we’re not there yet.

In a recent blog I made the case that Starbucks‘ lofty stock price is an indication that the economy is improving. I’ll make the case here that as long as consumers continue to spend their hard earned dollars on discretionary items like fancy coffee while gasoline is at such lofty levels, it is a sign that our society has accepted the reality of higher gas prices.

Of course there could also be a tipping point. $5 per gallon? $6 per gallon? Higher? No one really has the answer to that question. But, with the cost of money so cheap, portfolios of investors in much better shape, more people working, housing inventory shrinking, we might be able to absorb higher prices at the pump than one might think. In any event, if gasoline prices get to unacceptably high levels, we’re likely to see oil producers adjust their prices or run the risk of a weakening economy that benefits no one.

Consider this. Oil prices peaked in July 2008 near $147 per gallon. At that time, the S&P was close to 1250. The severe market decline began two months later. The S&P today is near 1370, so 120 points higher than July 2008, while a barrel of oil is near $110, or $37 lower. Thus, if oil were to get back to the $147 level, we would then see if there was any negative impact on the S&P. If the impact was minimal, that would tell me that consumer acceptance is greater than most might think, with investors being more focused on the bottom line of corporate America rather than rising oil prices.