Economy feels shock of oil prices

It's not likely to get any better over the next few months for the Minios and others in New England. Gas utilities, such as KeySpan Energy Delivery, Bay State Gas, and Nstar have all filed for higher prices ranging from 13 percent to 36 percent in March and April. Last week, in one indication of the volatility of the situation, the price for March natural gas futures on the New York Mercantile Exchange jumped 65 percent in one day.

Still, Richard Curtin, director of the University of Michigan's Survey of Consumers, says consumers don't expect energy prices to stay high. On Friday, he released his latest survey which showed confidence dropping, but not as sharply. "Consumers are assuming the war will be short and decisive and energy prices will fall," he says. "If it did not happen that way it would be a shocking development for them."

Certainly business is hoping that's what happens as well. Take the trucking industry. A year ago, truckers paid $1.15 a gallon. Today, diesel is at $1.71 a gallon, the highest since 1990. Many truckers are adding fuel surcharges that amount to about 80 percent of their additional cost. But the economics of this don't bode well.

"Say your tanks are bone dry, it costs $160 more to fill up than it did last year at this time," says Bob Costello, chief economist for the American Trucking Association in Alexandria, Va. "If fuel prices were to stay here for a long time, we would see a lot of bankruptcies," he says.

Some airlines are already close to bankruptcy. That's the case with American Airlines, which says it will follow United into Chapter 11 if it does not get concessions from its unions. Adding to its problems are higher costs for jet fuel which has climbed from 70 cents a gallon in mid-November to about $1.20 a gallon today. The company estimates that every cent per gallon increase in fuel prices adds $30 million to its expenses.

American hopes the oil markets have already discounted a war with Iraq. "Thus, future price spikes might be blunted from what they were the last time, if the shooting starts. At least we can hope," says Tara Baten, a spokeswoman for American in Ft. Worth, Texas.

But the Energy Information Agency in Washington expects oil prices to take their time easing. Because of the cold winter, inventories are low. OPEC nations say they are producing about as much as they can. "Our expectation is that the move below $30 a barrel will be later rather than sooner," says Dave Costello of the agency, a part of the US Energy Department. "That all assumes no further disruption because if there is, there will be more pressure on prices."

In other words, more sticker shock.

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