The current fiscal crisis in Rhode Island and across the country can easily find at least one common contributor: the price of oil. During the more recent recessionary periods, one of the chief culprits causing the country the most trouble has been crude oil. Rightfully so, oil gets blamed for a lot of problems. Not ignoring the diplomatic entanglements oil has caused, it also was at the center of debate during the energy crisis in the late 1970s and early 1980s, while generally forgotten for a decade or so, through the 1990s, as the country rapidly consumed cheap oil and tooled around in gas-guzzling SUVs, undermining previous strides to curtail dependence on this non-renewable resource.

Now, the culprit is back; oil is causing problems yet again. Indeed, oil has made a name for itself as the scapegoat for the across-the-board cost increases in virtually every sector of our economy. Food stores apologize for their increased prices, while blaming their increases on rising fuel costs. Airlines charge for checked luggage while jacking up the price of tickets, and say that the cost of fuel has forced their hand. Of course, trucks that run on gasoline or diesel are transporting products across the country, including food. When fuel prices rise, the cost of bringing products to market goes up, and, needless to say, almost all transportation costs go up when crude oil prices increase.

Additionally, the production costs of oil-based products such as plastics increases as well. This means that everything from the plastic coffee cup used to serve that morning drive-thru java, to the plastic bag that lines the trash can where the cup ends up, is tied to the cost of oil.

Not surprising, electricity costs go up when oil costs go up. Utilities such as National Grid buy much of their energy from companies that generate electricity in power plants fired by oil. As a result, utility companies seek rate increases to cover the increased costs, as National Grid did in May. In a letter filed with the Rhode Island Public Utilities Commission on July 2, 2008, David Graves wrote on behalf of National Grid and informed the Commission that the company thought it was necessary to hike electricity rates. He reported that “…it’s a direct result of increased in the cost of natural gas and oil.”

At that time, a barrel of crude oil cost about $132.19. Gasoline topped $4.00 per gallon at the pump. On July 11^th, oil rose to an unprecedented $147.27 per barrel. In a subsequent filing that month, National Grid brought to the attention of the PUC that “both crude oil and gas prices have increased since the company’s May 23^rd request for a Standard Offer Service rate adjustment.” The Commission responded by approving the 21.7 percent increase that National Grid requested in July, based on the steep rise in crude oil prices.

That was then. Now, crude oil prices have dived 50 percent and landed in the range of $66.00 and $73.00 per barrel.

The question is, when oil prices go down, does everything connected to oil also go down? Herein lies the problem, as it relates to electricity. The PUC often approves, sometimes with slight remorse, hikes in electricity rates, heeding the argument that the cost of electricity is directly related to the cost of oil. However, the Commission lacks interest in applying the same standard to cause electricity rates to lower when crude oil prices lower.

[On November 18th, the PUC proposed a 13.7 percent electricity rate cut effective Jan. 1.]

As individual consumers, we have little influence over private companies’ price setting, other than to vote with our wallets and not purchase their products. As taxpayers and public utility customers, however, we have the ability and the right to demand fair rates. Clearly, ratepayers deserve the same consideration National Grid received when our public utilities commission approved the most recent rate increase. When the PUC meets in November to consider utility rates, Rhode Island utility customers must come out in force and demand that the Commission lower our electric rates in accordance with the dramatic decrease in the cost of crude oil.