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NEW YORK — This wasn’t the way the inflation story was supposed to go in 2005. With oil and other commodity costs soaring, fears of prices surging out of control were on the mind of everyone from the Federal Reserve to business leaders to consumers.

Thankfully, that grim scenario didn’t happen. Sure, Americans are spending more to fill up their cars with gas or to heat their homes, eat Jell-O pudding, send a FedEx package or buy a new Sealy mattress. Yet overall, price increases have remained decidedly — and surprisingly — tame.

The reason: competition and productivity improvements, which have made it more difficult for inflationary pressures to ravage the economy over the last year, and probably for many more to come.

Worries about inflation intensified in 2005 as oil prices sharply accelerated for the second straight year amid concerns that supply was far short of global demand.

During the spring, crude oil prices soared past the $55 per barrel high reached in October 2004, then moved above $60 and peaked at almost $71 in the late summer after Hurricane Katrina crippled the Gulf Coast. While they’ve retreated to around $60 today, that’s still well ahead of the $43 a barrel where it started this year.

Those steep gains pushed the average retail gasoline price to over $3 a gallon in September, an increase in some markets of as much as $1 from just weeks before. And even though gas prices have pulled back to pre-Katrina levels, consumers face much higher home heating costs this winter.

At the same time, the price of commodities from corn to steel has risen.

These price jumps have fed concerns that inflationary pressures would start creeping into the broader economy. It’s not difficult to see how that could happen — anyone buying raw materials or transporting products would be paying more, which raises the chance that they would then pass that along to their customers.

The Fed has been closely watching this threat for months.

“There was a risk that the large cumulative rise in energy and petroleum product prices through the summer would be transmitted to core consumer prices,” the Fed’s policy-makers said, according to the minutes from their closed-door meeting on Nov. 1.

To fend off inflation, the Fed has continued to boost the federal funds rate, and on Tuesday raised that key short-term rate to 4.25 percent, the highest level in more than four years. It marked the 13th increase since the Fed began to tighten credit in June 2004.

So far, the Fed’s efforts have paid off. In its statement after that meeting, the Fed said that core inflation had “stayed relatively low in recent months and longer-term inflation expectations remain well-contained.”

Recent inflation data shows wholesale prices, excluding food and energy costs, have risen at a mere 2.6 percent for the last 12 months, while core consumer prices, which also exclude such volatile components, rose only 2.1 percent over the same period.

That slight gain is due in part to the difficulty that companies have in raising prices, especially those offering products without much differentiation. Think of what could happen to a computer or cereal manufacturer if they were to boost prices well above others in the same business. Consumers would likely shift their purchases to someone who sells the goods for less.

Productivity growth also has allowed many companies to lower costs by doing more work with less, and wage pressures continue to be contained. Also, the influx of products made abroad — namely in China — has drastically reduced business costs.

“Companies are reaping the benefit of enhancements in technology discovery, which has helped them increase their productivity,” said A.G. Edwards economist Patrick Fearon. “At the same time, there is a level of competition in the economy that is quite a bit stronger than it has been in the past.”

Just consider what’s gone on in the auto business, with manufacturers in recent months heavily discounting to spur sales. Heading into next year, General Motors Corp. has said it will deepen its price cuts by lowering the costs on 30 of its 76 2006 models.

Retailers this holiday season are being more promotional than in the past, including on the day after Thanksgiving when it was the most intense discounting ever. Wal-Mart Stores Inc. sold 700,000 portable DVD players at below cost.

Even industries that experienced some price inflation after the late-summer oil shock are already seeing a pullback in cost pressures. For instance, the Institute of Supply Management’s monthly survey of the service sector — which includes everything from insurance businesses to those specializing in transportation — found that only 44 percent of respondents paid higher prices in November compared with 58 percent in September, and 8 percent paid less vs. 2 percent two months before.

The outlook could be very similar. Companies don’t have too much flexibility when it comes to pricing power, meaning that every time they want to boost prices they have to carefully consider the potential consequences of doing so.

Still, not everyone is convinced that the current inflation picture is really as good as it looks. Blogger Jeff Matthews, who often discusses corporate America’s dealings and the economy, notes that he keeps hearing about the lack of pricing pressures, but his haircuts have gone from $17 to $22 and his church is facing an 10 percent increase in costs.

Then there is the sharp rise in gold in recent months, with prices soaring above $530 an ounce — the highest levels seen since 1981. Some market-watchers say that’s a result of investors being spooked by thoughts of higher-than-expected U.S. inflation going forward.

Maybe they are on to something, but so far, the fears of inflation seem to be a lot bigger than the fact. Let’s hope it stays that way.

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