Fuel costs rise; communities try to stay afloat

It appears no one will escape the impact of rising fuel and gas prices. Crude oil is the raw material. Whether it is refined as gas or used as heating oil, the price will affect everyone in some way.

The region ravaged by Hurricane Katrina is home to about a quarter of America's oil refinery and natural gas production complexes that turn crude oil into gasoline. Four refineries in the area are expected to be offline for at least 30 days. One of them, ExxonMobil's 185,000 barrel-a-day plant in Louisiana, is expected to be out of service for several months. To compensate for lost production, ExxonMobil officials say the company is diverting approximately a million barrels of gasoline production from its European and Asian refineries.

Senator Pete Domenici, chairman of the Senate Energy Committee, says, "There are going to be some questions asked about what major oil companies are doing with all their resources. Refineries, which have been enjoying strong profits and rising prices, are expected to see even greater profit margins with gas prices rising while crude-oil prices remain steady."

Area schools, towns and businesses will feel the pinch
Based on estimates for fuel consumption and current trends in pricing, the City of Eastport could face the need to expend $76,439, an additional $23,939 over the budgeted amount of $52,500, for all heat and vehicle fuel charges to the city, including the sewer department. Eastport City Manager George Finch says, "We are currently analyzing ways to reduce the amount of fuel consumption in both facilities and vehicles, but there is little room in that much had been done to decrease consumption before the prices increased." Finch cites the example of road salt, which is $55 a ton delivered for this winter; last year it was $45 a ton delivered, and $32 the previous year. "The price of salt is the same," comments Finch. "It is all in the delivery costs."

Union 104 Superintendent Arthur Wittine says, "We are way under budget for fuel oil and gas. When we did our budget, we did not expect this. There isn't anything we can do about it. We have to keep the buses rolling and the buildings heated." Wittine says the needed money will come out of non-personnel costs. "We are going to have to shift resources around." The school union serves five towns, and transportation distances for the schools vary between the towns. "Across the union we are between $6,000 to $8,000 over budget, and prices may go higher," comments Wittine.

Federal Marine Terminals Manager Skip Rogers says, "We have been approached by the truck drivers, who have seen an increase in gas prices. We will probably have to address the problem by a surcharge to our customers. The fleet of lift trucks used to load ships are powered by fossil fuel. Other terminals within our company that have cranes have gone to their customers for surcharges." At this point, he says he is waiting to see how things develop after Labor Day.

Rogers believes there are numerous causes for the increase. Some is profit taking, but he points out that capacity for refining crude has been reduced by the recent hurricane. Most of the refineries in the U.S. are in the Gulf Coast area, with pockets of refinery activity in New Jersey. If the government releases oil and gas from the U.S. Strategic Petroleum Reserve, it still needs to be refined. Rogers points out that there has not been a new refinery built in this country since 1977.

Robert Peacock of R.J. Peacock Canning Company in Lubec says consumers will see the price of food go up, with transportation costs contributing to the rise in price, and any kind of frozen food requires the use of energy. "We are importing a lot of fish, and the price of shipping it from overseas will increase." Peacock says this week taking a container of fish from New Bedford to Raynham, Mass., a distance of about 60 miles, went from $300 to $550 in one day. The $300 charge has been more or less steady for the last few years.

Peacock says the lack of electricity has shut down many of the refineries in the Gulf area. One oil company he is familiar with has started up this week, but there is no place to house the workers so they are living on the oil barges.

On the other side of the border, Grand Manan Village Manager Andrew Daggett says gas prices have gone up about 40% in the last two weeks. Grand Manan has always paid about five cents a litre more than any other place in New Brunswick. "We have never understood why it costs so much more," Daggett says. Even though the fuel comes over on the ferry, Daggett doesn't believe it costs more to transport gas to Grand Manan than to truck it to Edmunston. "All we get on the island is regular gas and diesel." According to Daggett, diesel costs 4 or 5 cents less in Blacks Harbour. "I think it is an excuse, and they squeeze what they can out of us."

Adjusting for the difference in Canadian and American funds and measures, the litre versus the gallon, Daggett says Americans are paying about $4.60 Canadian per U.S. gallon compared to $5.50 Canadian per U.S. gallon paid in New Brunswick. Daggett sums up the gas question, saying, "I think it is a monopoly."

The use of oil in asphalt will increase costs for road maintenance. The price of maintenance of roads will not go up this year because the island's contract with the Department of Transportation is based on a three-year average, but the village will have to budget next year for increases.

Gas station owners, oil dealers give reasons
Jim Lowe, owner of BayCity Mobil in Eastport, says he can't prove it, but he believes, "It is nothing more than gouging the public. I can't prove it, but I don't think it needs to go up 40 or 50 cents. I set my price up on the board twice in one day and that is pretty unheard of. It makes it a lot harder for us." Asked who is doing the gouging, Lowe believes it is the large oil companies. According to Lowe, Irving Oil is jacking its prices up and the company has its own refineries in Canada, and not in the hurricane-ravaged Gulf. Lowe thinks the price may drop a little this week, but, "It's not going to go down as fast as it went up."

Jamie Pye of the Maine Oil Dealers Association says wholesale prices are up. He notes that gas and oil are commodities on the mercantile market, and supply and demand govern the market. About 45% of this country's refineries are based in the Gulf. Pointing out that when you have a reduction in supply you get a surge of prices, Pye says, "We had a good report this morning, saying some of the refineries are going back on line and some of the pipelines are back in operation." Pye continues, "Unfortunately, we are just the messenger, with 97% of the price determined before it gets to Maine." The average price of gas in Maine during the last week of August was $2.55 a gallon. Of that cost, 25.9 cents is state of Maine tax, 18.4 cents is federal tax, and 3.29 cents in environmental tax.

Doug Diffin of Johnson's Mobil Mart in Pembroke says one needs to subtract 45.276 cents in taxes for each gallon of gas one purchases and 51.924 cents for diesel. "There are hidden taxes you never know you are paying." All 50 states levy a flat rate tax, 10 to 20 cents on each gallon of gas sold. Most states also apply a sales tax usually 2% to 5% on gas purchases. Several states have announced plans to suspend the tax. Predetermined costs include credit card fees. When gas is paid with a credit card there is a three percent credit transaction fee, with nine cents going to the credit company.

Diffin says the wholesaler sells the gas at a certain price to the independent dealer. The independent dealer cannot sell gas at less than the price he paid for it, since it is illegal, says Diffin. Above the purchase price, the station owner can add as much as he wants. Diffin says his competitors will keep him in line to a certain extent. Diffin also notes that the 25.9 cents the state adds to the price is tied to the state budget and the rate of inflation. "It went up last July 1 and it will probably go up next July 1," predicts Diffin.

Pye says, "Don't beat on your local guy, they are just holding on."

Mike Tammaro of V.L. Tammaro Oil Company in Baileyville observes, "Years ago oil prices were based on supply and demand, it was very simple. There are so many other factors today, geopolitical and environmental. Why? Because we have become a very thirsty world."

According to Tammaro, there are not enough oil refineries and there has been one crisis after another. He believes Canada, the U.S. and Mexico should form a cartel and produce their own fuel. Of concern to Tammaro is the fact that when the price of oil goes up to $60 a barrel it has an effect on business and the growth of the nation's economy.

State mobilizing resources
Governor John Baldacci has mobilized resources within his office to explore and take every viable action to address high gasoline and oil prices and to minimize their impact on Maine people. According to a press release issued by the governor's office, Baldacci has been discussing energy prices with Maine Attorney General Steven Rowe. "We are working together to make sure that there is no profiteering, unfair trade practices or collusion in gas and oil markets." The governor has met with the Maine Oil Dealers Association and individual dealers. The governor has said he will work with the association to ensure that supplies remain adequate. He says he was assured on September 1 that there is an adequate and stable inventory of oil. "Gasoline supplies appear to be adequate, as well, but we are encouraging Maine people to conserve energy."

Rep. Davis Bowles, House Republican Leader, in a letter to Governor Baldacci dated September 6, asked, "In light of the sudden and unprecedented increase in the price of gasoline and heating oil, we offer the following proposals for your consideration." He noted that the Republican leadership has agreed on a list of ideas as a way to provide relief to Maine citizens who are struggling to pay for gasoline and heating oil. "We do not put this forward as a comprehensive list, we are open to all useful ideas." Bowles believes much of the price spike is a direct result of Hurricane Katrina and the shutdown of many refineries along the Gulf Coast. "It is unclear where prices will go. At this time of financial strain on our citizens, we urge that we all work together for the common good and to sustain our economy."

Among the suggested proposals by the House and Senate Republican office are: suspend Maine's 25.9 cent gasoline tax for a period of at least 60 days to allow the market to stabilize; repeal the tax on heating oil used by businesses; repeal the automatic indexing of gasoline taxes; reduce most administrative state vehicle travel by 15 percent; order a temporary change to state employee's work schedules from five eight-hour days to four 10-hour days, wherever possible; expand state efforts to coordinate and improve car pooling on a statewide level; and instruct the Department of Environmental Protection to investigate the use of lower-grade diesel and gasoline fuels, such as dyed diesel use for agricultural purposes.

Energy forum in province
In New Brunswick, Liberal Leader Shawn Graham is hosting host an Energy Forum on September 9 and 10 at the New Brunswick Museum in Fredericton. The soaring cost of oil and the unique energy-related issues that New Brunswick has faced in the last few years will make this forum particularly timely. Ray Cote, director of the Eco-Efficiency Centre in Nova Scotia, will discuss the development of eco-industrial parks and byproduct synergy, which are the basis of the planned development in the Saint John Shipyard. Several other experts will speak on energy conservation, the future of the energy sector, alternate energy sources, including hydrogen, and the future of nuclear power.