Featured Stories

Fuel prices on rise; economy on ropes

What does gasoline have to do with the price of eggs? Plenty

Skyrocketing fuel prices are rattling Oregon's rickety economy and could even rock the nation's fragile recovery off the rails, economists fear.

The average price of a gallon of regular unleaded gasoline in Portland on Tuesday was $1.914; statewide it was $1.895 Ñ an all-time high.

'We've been setting a new record price almost every day since the 26th of February,' said Elliott Eki, public affairs director for AAA Oregon.

'It's one more bit of bad news' for Oregon, said Portland economist William Conerly.

Nationwide, the average price of gasoline hit $1.702 on March 11, a shade under the peak of $1.718 reached in May 2001.

A variety of factors, including the threat of war and fear of terrorism, are affecting gas prices, Eki said, adding, 'Gasoline retailers will soon be moving to summer blends, which cost more to refine, so it's difficult to forecast what price changes lie ahead.'

Price shocks at the gas pump ripple through the rest of the economy.

'When you go to the store, whether the grocery or Nordstrom, everything in the store got transported there from somewhere else,' Conerly said. 'Energy is built into the very fabric of the supply chain.'

Take TriMet, for example. The transit agency is now paying $1.40 a gallon for the diesel fuel that powers its fleet of buses. Last week it paid $1.22 a gallon, and last July 69 cents.

'The weekly average now is at the highest price it ever has been,' TriMet Communications Director Mary Fetsch said. 'We were in the $1.30 per gallon range during the gulf war in 1991.'

The agency budgeted $5.3 million for its fiscal year, which ends June 30, to pay for the 6.3 million gallons of fuel it expects to consume. If the price stays at $1.40 for the rest of the fiscal year, Fetsch said, 'we'll be paying about $1.2 million more in fuel costs than budgeted.'

TriMet buses consume about a half-million gallons of fuel a month, but the transit system only has enough storage for a seven-day supply of fuel.

One bright spot, Fetsch said, is that TriMet buses get 4.5 miles per gallon, 'which is very good for a large transit system Ñ most are getting 3.2 to 3.3 miles per gallon.'

Commercial carriers, from truck lines to airlines, are adding surcharges to help cover increased fuel costs.

After the surcharges, said Terry Reid, terminal manager for Peninsula Truck Lines in Portland, it's a matter of searching for savings. Trucks that get better fuel mileage are sent on the long trips, he said, and others stay closer to the terminal. 'Other than that, there's not much else you can do.'

Reid said, 'I'm looking at all kinds of things: how much money we spend on uniforms for our guys, to how often I have my trucks washed. You've got to look at every bit of it Ñ how much copy paper used to supplies in the office, to how many people can you get by without. It's a sad thing.'

'This is not a new problem,' said Steve Holmes, president of

S & H Trucking Co. 'We've had a fuel surcharge in effect for probably a couple of years. As the price of fuel fluctuates, so does the fuel surcharge. We pretty much pass it on to our customers. Me going out of business wouldn't do them any good. We're doing all we can to conserve fuel.'

Airlines boost surcharges

Regional carrier Horizon Airlines added a one-way $10 fuel surcharge on most flights several months ago Ñ a path other airlines also are taking. Air Canada, for example, said last week it is boosting its domestic fuel surcharge to $50 from $30 on all return flights between cities more than 300 miles apart.

Horizon spokeswoman Cheryl Temple said the price of aviation fuel, now $1.20 a gallon, hasn't risen to the highs hit during the gulf war, when it ranged from $1.30 to $1.40 a gallon.

Fuel is the airline's second highest expense, after salaries for its 4,000 employees. The newness of the airline's fleet of 60 planes, none more than six years old, helps with the fuel bill, according to Temple, who said Horizon's Bombardier-built turboprops and regional jets, acquired since 2000, are far more fuel-efficient than the aircraft they replaced.

Even nonprofit organizations are suffering because of the rising oil prices. Jean Kempe-Ware of the Oregon Food Bank said it's costing the agency about $1,600 more a month to fuel the four trucks that travel about 16,800 miles a month, delivering food to emergency relief agencies across Oregon and in Clark County, Wash.

The tipping point?

Some economists fear two or three months of oil priced at $40 or more a barrel will tip the United States back into recession. Economist Conerly said, 'An oil price increase itself is not enough to trigger a recession, but is the factor that sometimes tips the balance.

'We've seen oil prices go up in anticipation of the war, and supplies have been a little bit tight because we've grown the world economy a little faster than we're growing energy production,' he said.

After the gulf war, when oil supplies were more plentiful, prices quickly stabilized. Conditions are different now, he noted.

'I'm more concerned by the oil prices today because the economy is not in a condition to shrug off oil prices,' Conerly said.