Stock investors have become all but inured to news of ever-higher oil prices, a quality they could come to regret.

The current market reaction to surging energy prices has hallmarks of denial. After falling earlier in the year when oil went above $40 a barrel, the

S&P 500

has recently moved back toward its 2004 high, cheered on by bulls who believe oil must eventually fall.

But the boom hasn't let up. November crude futures recently crossed $54 a barrel, and with a long, cold winter ahead, the upward pressure seems unlikely to abate.

The run-up has lifted energy stocks, with the Amex Oil Services index up over 15% since Aug. 17. Financials also have fared well during that time, due in large part to lucrative returns on energy investments. So where is the downside of soaring oil prices?

"The market is doing it's best to ignore high oil," said John Bollinger, president of Bollinger Capital Management. "I'm not so sure they'll be able to do that forever."

The oil-bear camp got a boost Tuesday when November crude futures gave up $1.13 to $52.51 a barrel, a move that might have been foreshadowed in the stock prices of supermajors

ChevronTexaco

(CVX) - Get Report

,

ExxonMobil

(XOM) - Get Report

and

BP

(BP) - Get Report

. All three stocks fell for a second consecutive session Tuesday.

Other sectors have been notably unmoved by oil, including those with big fuel exposures. Perhaps the most obvious place for investors to look for weakness in the face of high oil is the transportation and shipping industry, where any change in fuel costs must either eat into profit margins or be passed on to customers.

Still, Paul Desmond, president of technical-analysis firm Lowry's Reports, said that only 10 out of 50 or 60 transport stocks he watches currently sport charts that would lead the firm to urge they be sold. The rest are in "strong buying positions," Desmond said, including

Yellow Roadway

(YELL)

, up almost 50% since early May, and

Ryder System

(R) - Get Report

, up 35%.

The Dow Jones Transportation Index has added 13.4% since Aug. 16.

"Transportation stocks ought to be the ones sending us a message about soaring oil prices, but they're not," Desmond said.

Neither are utilities, basic materials or auto manufacturers. Airline stocks are taking a beating, but that industry is weighed on by a host of other factors. High fuel costs are only a knockout blow for them, not the root of their problems.

Semiconductors and other technology issues are underperforming the market, but their fortunes aren't directly tied to energy prices.

Even retail stocks have showed strength, with the S&P Retail Index up 8.3% since the beginning of August, despite heightened concerns about a slowdown in consumer spending.

Wal-Mart

(WMT) - Get Report

has shown deterioration in sales growth in recent months, a trend that is widely attributed to high gas prices weighing on discretionary spending for low-income shoppers. Overall, investors are still buying retail stocks and expecting a busy holiday season at the checkout lines.

"That buying enthusiasm is coming back," Desmond said. "Nobody is interested in selling their stocks at this point, due to increasing enthusiasm about strength in this economy. In a strong economic environment, we can get along even with record oil prices."

While the energy boom has had a muted effect on the stock market, it is starting to show up as a burden on a variety of businesses.

Alcoa

(AA) - Get Report

reported flat earnings for its third quarter despite a 12.5% jump in sales. In explaining its stagnant bottom line, the industrial juggernaut cited higher costs, particularly for energy in Europe and North America and petroleum-derived products, such as resin.

In September,

DuPont

(DD) - Get Report

CFO Gary Pfeiffer said he expects an economic slowdown in 2005 due to higher energy costs and weaker technology spending after a banner first half this year. He said the company's market index, a key measure of industries it serves, will slow to a growth rate of 2.9% next year compared with a projected 5.2% in 2004.

In August,

FedEx

(FDX) - Get Report

reported a 10% jump in fuel costs in fiscal 2004, but that amounts to a mere fraction of the company's costs. It didn't stop the shipping giant from boosting earnings guidance for fiscal 2005.

"We have strong momentum in our businesses and believe the economy continues on a sustainable expansion path," said Alan Graf, FedEx CFO. "While there are potential risks on the horizon, such as prolonged oil costs that could impact the worldwide economy, we believe we will continue to see strong demand, which will result in higher earnings."

During the oil shock of the late 1970s, the

Federal Reserve

lowered interest rates and raised the money supply to offset its effects. The result was rampant inflation that wreaked havoc on the stock market. This time around, the Fed is in the midst of tightening interest rates and inflation has remained tame.

Paul Mendelsohn, chief investment strategist with Windham Financial Services, said low interest rates may be the reason for the market's calm.

"It's just not clear that this market is behaving as it should traditionally behave and I think one of the factors for that may be the offsetting interest rates that are holding up these sectors artificially," Mendelsohn said. "Usually, this stage of the oil cycle is the end of the market, because it brings inflation onto the back of it, and the market doesn't like inflation. That could still be where we're going here."

Many observers say today's oil prices are low compared to the oil shock of the 1970s when adjusted for inflation. In today's dollars, the oil spike of that era climbed above $90, nearly twice the prices of today. The relative mildness of this recent spike could explain why the market is holding up.

"I buy that, up to a point," said Barry Hyman, equity market strategist with Ehrenkrantz King Nussbaum. "But even in constant dollars or 1980 dollars, oil is still up almost 150% year over year. That is still a problem. It's a problem for the consumer. The story is not complete yet."

In Hyman's view, the energy market has lost touch with the fundamentals of supply and demand due to geopolitical turmoil and terrorism fears.

"Oil will back off when we get through the winter season and the supply-and-demand story becomes more realistic," he said. "This is clearly, in our minds, not a sustainable price. Still, it does surprise me that the market has held up here. I think you have to be careful. It's got to show up in the utilities at some point."

If negative economic forces brought on by soaring oil prices are building up, an unwelcome jolt could be in store for the market. In the meantime, most investors are convinced that the U.S. economy is less sensitive to oil prices now, and prices are soon headed back to more acceptable levels.

"The economy is still doing OK, and corporate profits, at 13.5% growth, are still great. So maybe there's a reason we're still here," Mendelsohn said. "Everyone just believes that eventually, oil is going to fall back to $35 a barrel, and everything is going to be fine. Maybe they're right, but my fear here is that we're going to see

effects of these high prices hit stocks all at once. We're going to hit this breaking point, and then boom! Everybody's going to ask, 'What happened?'"