Oil Tensions Sink State Econony Further

BOSTON--Rising tensions in the Middle East could further sink the New England economy, as motorists feel the pinch at gasoline pumps and manufacturers watch oil prices climb, experts said yesterday.

The fallout from last week's invasion of Kuwait by Iraq has already been felt at gasoline stations. A survey conducted yesterday of full-service dealers in Massachusetts showed an average price increase of 4 cents per gallon for regular gasoline.

Massachusetts Energy Commissioner Paul Gromer said his office was checking to see whether the gasoline industry was conspiring to fix prices at a higher rate. Politicians in other New England states urged federal officials to watch for price gouging.

May Hurt Industry

But motorists are not the only ones who could feel the impact. A boost in oil prices also could hurt the area's industries, which already face high energy costs because the region lacks natural resources, experts said. Manufacturers, in particular, use large amounts of energy, but have been struggling lately with layoffs and other cutbacks.

"It has the prospect of making us less competitive," said John Gould, president of Associated Industries of Massachusetts.

An area that could feel the brunt would be the region's high technology sector. For example, Boston is looking to biomedical businesses to boost the economy this decade.

"These facilities are very energy-intensive," Boston Redevelopment Authority Director Stephen Coyle said. "An energy crisis could affect the profitability of these projects."

Biomedical laboratories require "50 to 60 air changes an hour, and that means high utility costs," he said.

Approximately 40 percent of New England's electricity comes from burning oil, compared with 5.5 percent nationally, Gromer said.

In Massachusetts, residents rely on oil for nearly 70 percent of all their energy uses, such as heating, gasoline and electricity. The national average is 42.8 percent.

Gromer said the recent events in the Middle East underscore the need to further diversify energy sources and use more energy-efficient cars and buildings.

Wayne Ayers, chief economist at Bank of Boston, said the Middle East crisis would have a more significant impact on New England if it helps push the national economy as a whole into a recession.

Aside from the rise in fuel costs for manufacturers, the jump in gasoline prices could also hurt the economy by siphoning money away from consumers, forcing them to cut back in other spending, Ayers said.

Some state officials yesterday questioned the motives behind the rise in gasoline prices, which have jumped more than a nickel per gallon in many locations.

Massachusetts Attorney General James Shannon said he was contacting counterparts in other states to protect consumers against price gouging. Rhode Island Attorney General James O'Neil called it "naked greed" and said there should be investigations by Congress and the National Association of Attorneys General.

An employee at a Boston Texaco station, who asked not to be identified, expressed similar complaints, saying workers had to raise gasoline prices by six cents last Friday.

"We are at the mercy of our suppliers," the employee said.

At Carl's Sunoco in Warwick, R.I., where manager Tom Seaton said prices had increased three cents a gallon during the weekend, the extent of most complaints was a shift to self-serve.

"They don't care. Some people complain, but most just put the gas in," he said.

"The market basically doesn't respond to real facts anymore. It responds to perceptions and what people think is happening," said Robert Murray, vice president of the American Automobile Association of South Central New England.

Richard Sedano, chief engineer for the Vermont Department of Public Service, said the department has received some complaints about the increase in home heating oil prices.

"It's not a huge list," Sedano said. "There doesn't seem to be any unavailability of product."

Meanwhile, more than a dozen U.S. senators sent a letter yesterday to President Bush, urging him to watch for price-gouging by retail gas and oil dealers.

"Rather than waiting to look back and study why prices have increased, we believe that you should pull together the resources of the federal government to monitor the situation now," the lawmakers said.

Among those signing the letter were Sens. John Kerry (D-Mass.), Joseph Lieberman (D-Conn.), and Claiborne Pell, (D-R.I.).