As Oil Prices Go Up, Companies Struggle to Contain Their Costs

When Hawaiian Electric Co. submitted a rate plan to regulators last fall, it included a worst-case scenario in which oil prices would start at $70 a barrel and escalate over time to $119 a barrel.

Today, the worst-case scenario has come true for current prices.

“When we did the scenario at the $70 range, it did seem high at the time,” said Lynne Unemori, a spokesman for Hawaiian Electric, which unlike most utilities relies on oil for three-quarters of its fuel needs. Company planners thought prices were more likely to be “in the $40 to $50 a barrel range,” she said. Now the company says that the rate increases it received last September aren’t enough and that it will seek more from regulators.

In many U.S. corporate boardrooms, strategists are taking another look at their assumptions about oil prices and trying to figure out how they will affect business. The price of petroleum can make a significant difference in a company’s profits.

Washington Post