Rise in oil prices fuels concerns

Gasoline: Local businesses that work on rails, road and waterways must decide how to offset rising costs.

February 20, 2000|By LORRAINE MIRABELLA AND KRISTINE HENRY | LORRAINE MIRABELLA AND KRISTINE HENRY,SUN STAFF

These are hard times for those making a living off rails, roads and waterways. Crude oil prices, which have been increasing since March thanks to an OPEC production cutback, rose above $30 a barrel last week -- a nine-year high and nearly triple what they were a year ago.

Local businesses are scrambling to make up for rising' expenses. Some are locked into contracts and can't raise their prices. Many that can pass on the extra cost are hesitant to do so for fear of losing customers.

Diesel in Maryland averaged $1.08 a gallon last February and is now about $1.75. Regular unleaded gasoline, 95 cents a year ago, has increased 44 percent to $1.37. Homeowners are reeling from heating-oil bills that have more than doubled.

While the high crude prices are tough on the transportation industry, economists say the prices shouldn't cause major inflationary ripples throughout the economy. During the first crisis with the Organization of the Petroleum Exporting Countries in 1974, oil made up 9 percent of the U.S. economy. Now that the marketplace is moving from manufacturing to services -- and because technology has aided efficiencies -- oil accounts for 3 percent of the economy.

"I think the increases are relatively small, and it will be hard for anyone to say, 'Look, prices [for goods] are up because of higher energy prices,'" said Mark Zandi, chief economist at RFA Dismal Sciences Inc. in West Chester, Pa.

Industry experts predict that OPEC will decide to boost oil production when its members meet March 27.

Even if production is boosted, analysts say it is likely that prices won't reflect it until the end of the year. And that leaves many businesses wondering how long they can survive.

The following articles look at how the rise in oil prices has affected various businesses in the Baltimore area.

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