Hidden Costs of Oil Hit Business Hard

March 18 -- In an economy so weak that most businesses are neither spending nor hiring, the soaring price of energy is pushing some companies to the brink of bankruptcy.

One company feeling the pressure is Donovan Heat Treating of Philadelphia. The two-year-plus slump in manufacturing has been bad enough for the company. Now the soaring cost of natural gas is threatening its very survival. "It's very difficult to stay in business over a period of time, say even six months," said CEO Jeff Uhlenburg.

The firm, which treats metal by using energy to heat it to high temperatures, has coped with rising energy prices by raising its costs to customers and cutting salaries. But neither has made a dent in the 300 percent increase in its energy costs. "I would call it an absolute crisis right now," Uhlenburg added.

"Crisis" is also the word used by some chemical companies, which are also heavy consumers of both oil and natural gas. Many feel the sting of high prices in two ways — they use natural gas as an ingredient in their products and as a fuel to manufacture those products.

For some chemical companies, natural gas and oil can account for 80 percent of their costs.

Dow Chemical, for instance, has raised customer prices 6 percent in the past year, but with energy prices up 35 percent the Midland, Mich.-based company has had to close plants and lay off workers.

Another large chemical company, Philadelphia-based Rohm and Haas has also announced price increases and surcharges for some of its products due to high energy costs.

Ingenuity Helps, But Outlook Is Grim

Paul Angelico, president of Twin Rivers Technologies, a chemical manufacturing company outside Boston, says a little ingenuity has helped his company, which uses oil to make a key ingredient used in everything from shampoo to cosmetics to tire rubber, cope with the rise in energy prices.

"I've been in this business for 25 years. I've never seen energy costs this high," he comments. The only way the company has avoided crisis, he adds, is by finding a way to convert an oil waste product into a burnable fuel, saving more than half-a-million dollars a year on an annualized basis.