🔒Middle East conflict casts shadow over Maine energy prices, economy

Maine may be thousands of miles from the escalating conflict in the Middle East, but may face significantly higher energy costs and broader economic risks if the war drags on, experts warn. In the past week alone, the average price for regular gas in Maine has shot up from $2.91 a gallon to $3.21 as of Friday, the latest data from AAA show. Prices are updated daily. Over the same period, the national average for regular gas has climbed from $2.98 a week ago to $3.32 per gallon on Friday. Crude oil prices surged past $85 a barrel amid slower tanker traffic in the Persian Gulf — a route for about a fifth of the world's oil —  and widespread worries about global energy supply chains. On Thursday, AAA noted that the last time the national average gas price made a similar weekly jump was in March 2022 at the start of the Russia-Ukraine war. Financial markets are expected to take another pounding on Friday as the seven-day-old conflict triggered by U.S. and Israeli attacks in Iran spread to other countries, with Israel intensifying attacks in Lebanon's capital and reports of attacks on tankers in Gulf waters. Some European countries have also begun deploying armed forces to the Middle East, according to media reports. In Maine, the impact on energy prices and the economy as a whole could be far-reaching. “When energy costs rise, everyone feels it — at the gas pump, in heating bills and in grocery prices,” says Oak McCoy, an economics professor at the University of New England’s College of Business.

'Broad-based tax on consumption'

Particularly in Maine, shocks are greatest for lower- and middle-income households because they devote a larger share of their income to energy and transportation, McCoy noted. “Heating oil remains widespread, and many residents commute long distances for work,” he said. “A spike in oil prices functions like a broad-based tax on consumption, squeezing household budgets and small business alike — and doing the most damage in the winter months.”

'New reality'

Rising oil prices also mean higher heating costs in Maine and the rest of New England, which are both reliant on liquefied natural gas for electricity generation, said Patrick Woodcock, CEO of the Maine State Chamber of Commerce. “This market has been very volatile since the Iranian conflict commenced this weekend, and New England shares some of the same vulnerabilities as Europe with respect to LNG and prices,” Woodcock said. “While we hope this is resolved quickly, any electricity supply contract will price in this new reality if it includes a period through winter,” he added.

Solar to the forefront

Some experts argue that volatility of oil prices strengthens the case for diversifying Maine’s energy sources to solar and other clean sources. “If Middle East tensions keep global markets volatile, Maine’s strongest economic buffer will be reducing reliance on heating oil through efficiency, electrification and locally sourced renewables,” UNE’s McCoy said.

Phil Coupe, co-founder of employee-owned Revision Energy, notes that spiking natural gas and oil prices reinforce the push for renewables like the solar energy that the South Portland-based company provides across northern New England. "Investing in a solar array has become a proven strategy for Maine businesses, institutions and citizens to eliminate volatile oil and gas price shocks that are beyond anyone's ability to control, like sudden wars in Ukraine and now Iran,” Coupe said. “Since 2003 we have installed more than 20,000 clean energy systems in New England and thus far not a single customer has told us that solar energy is more expensive than burning fossil fuels,” he added. “Meanwhile, the cost of utility power has increased every single year and continues upward."