Businesses Hurting, But Unlikely To Get Help On Gas Prices
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Capital Region business owners are feeling the pinch. Local gasoline prices have increased 53 cents over the past year to $3.45 a gallon, while diesel has risen from $1.46 to $4.40 a gallon, according to the American Automobile Association.
That’s more of a hit than in the rest of the country. Gasoline prices in the United States hit $3.39 a gallon April 14, up 51 cents from a year earlier, according to the Energy Information Administration. Diesel fuel was $4.06 a gallon, Internet Sales up $1.18 over a year earlier.
Energy analysts are predicting more of the same. Prices are expected to climb through the spring.
Any sense of optimism on the part of business owners has been further dampened by Congress, which has expressed sympathy with their plight, but seems unlikely to suspend the federal gasoline tax.
Trucking companies are especially feeling the squeeze.
Joey Champagne said he doesn’t need a calculator to figure this year’s profits at his waste-hauling company.
Internet Sales “I’m running my business at a loss,” said Champagne, who operates Champagne Carriers Inc. out of the Port of Albany.
It’s not due to lagging sales–Champagne’s business is booming. Total income for the 50-person company topped $10 million in 2007, up from $6.8 million in 2006.
The weekly fuel bill to operate his 60-truck fleet has increased about $30,000 to $100,000 over the past year. The big hurt
High gasoline prices are hurting many other types of businesses as well. Construction companies, for example, tend to use a lot of fuel.
At Zandri Construction Corp. in Cohoes, the fleet includes about 18 gasoline-fueled vehicles, most of which are SUVs or pick-up trucks.
Richard Zandri estimated he spent $40,000 to $50,000 on gasoline last year, about $10,000 more than the previous year.
MLB Construction Services LLC is considering adding alternative-fuel vehicles to reduce gasoline costs in its fleet. MLB has about 30 vehicles at its offices in Malta, North Carolina and Florida, most of which are SUVs, pick-up trucks and vans.
Fuel expenses, including diesel purchased for a few large trucks, increased 62 percent for the year ended March 31 compared to the same period a year earlier, said Doug Brown, vice president for construction services. Brown declined to reveal the dollar amount spent on fuel.
There is hardly a business sector unaffected by the rising cost of gasoline.
The spike in diesel prices has driven up delivery expenses by about $15,000 a week at Stewart’s Shops Co., Internet Sales a Malta-based convenience store chain, said company President Gary Dake.
“And I buy diesel cheaper than most because we pick it up at the port [of Albany],” he said.
Stewart’s fuel tankers, food delivery trucks and milk trucks log between 55,000 and 60,000 miles a week serving the company’s 325 convenience stores.
The price of diesel has grown steadily over the past year.
In March 2007, Stewart’s was paying about $2.69 a gallon for diesel, said Chris Burby, who manages Stewart’s fleet of about 35 trucks.
The average price as of March this year was about $4.06 a gallon. A spike one day last week sent the price to about $4.40 a gallon, Burby said.
Frank Gallo Jr. has seen fuel costs rise about 40 percent in the past two years.
The owner of Frank Gallo & Son Florist, based in Schenectady, said two years ago he was paying from $3,400 to $3,700 a month to run his eight delivery trucks. Today, it costs him $5,000 a month.
The Eddy Visting Nurses Association has more than 270 nurses, home health aides and other health care workers on the road at any given time, racking up about 100,000 miles a month.
The nonprofit organization, a division of Troy-based Northeast Health, must constantly adjust the rate at which it reimburses these workers, basing the figure on the average gas price in the region.
At the moment, it pays 50.5 cents a mile, for a grand total of more than $50,000 a month.
“We look at it as part of the cost of providing care to our patients and compensating our workers,” said Michelle Mazzacco, vice president and director of Eddy VNA. The association covers five counties, and some workers will travel up to 500 miles a week.
In 2007, the nonprofit spent more than $575,000 on mileage reimbursement. Between a rock and hard place
Many contractors have added a fuel surcharge on their invoices to pass on some of their rising costs.
Surcharges that Zandri Construction pays for concrete and other materials delivered by subcontractors also have gone up. Those costs, in turn, are rolled into the bids that Zandri submits to prospective clients for new construction projects.
“It just affects everything and everybody,” he said.
Jim Dawsey, chief operating officer at MLB Construction estimated that the higher fuel costs add about 10 percent to bid packages the company prepares. The fuel surcharges levied by various subcontractors are expected to increase.
“We have been getting more and more correspondence from vendors over the past couple of months saying we should anticipate more,” Dawsey said.
Gallo, of Frank Gallo & Son Florist, said he hasn’t raised his delivery fee of $11.95 in two years. The company delivers throughout the Capital Region.
Holding the line on delivery fees hurts, especially because Gallo’s suppliers have passed their fuel costs to him. He figures their fuel surcharges have increased by about 35 percent in the past two years.
“We talk about that internally on a daily basis–as to whether we have to increase our delivery fee based on fuel costs,” Gallo said. Suspension of gas tax unlikely
Small businesses pleaded with Congress for relief from record-high gasoline prices, but all they got was a sympathetic ear.
Many companies testifying at a House Small Business Committee hearing on April 9 predicted the most dire outcomes if the price of fuel continues to increase. Some forecast companies going out of business at “alarming rates.”
Suspending the federal tax on gasoline is one way to provide some immediate relief at the pump.
The federal gasoline tax is 18.4 cents per gallon. State gasoline taxes average 29 cents per gallon; in New York, it’s more than 41 cents a gallon, one of the top three highest rates in the country.
A poll conducted in March by Rasmussen Reports, a public opinion polling firm, found that 60 percent of Americans think the federal gasoline tax should be suspended until gasoline prices come under control.
The problem is, high gasoline prices may be here to stay. The Energy Information Administration predicts average U.S. gasoline prices will peak at $3.60 per gallon this spring. Prices are rising because even though gasoline consumption is falling in the United States, it’s continuing to increase in China, India and other countries.
The federal gas tax funds transportation projects, and members of Congress are reluctant to cut it. Bush urged to stop filling reserve
Many members of Congress do favor suspending purchases for the Strategic Petroleum Reserve, which was created in 1975 to guard against supply disruptions. Suspending these purchases would increase the supply of oil and help reduce gasoline prices, supporters contend.
On April 3, U.S. Rep Kirsten Gillibrand (D-Greenport) asked President Bush for a six-month ban on filling the reserve.
In a letter, she also asked him to release 15 million barrels of oil into the U.S. market over that same time.
The last time the U.S. tapped the petroleum reserve was after Hurricane Katrina hit in 2005. The reserve currently holds 700 million barrels of oil.
In her letter, Gillibrand cited industry analysts who believe her two proposed actions could knock as much as 25 cents off the average price for a gallon of fuel.
Gillibrand acknowledges that her plan “would provide only short-term relief and is not a long-term solution,” a point often raised by critics of calls to tap into the nation’s petroleum reserve.
A White House spokesman said suspending purchases for the reserve would have little effect on the price of gasoline, since the oil added to the reserve amounts to less than one-tenth of 1 percent of daily worldwide consumption. In the meantime
Meanwhile, businesses cope.
Gallo, the Schenctady florist, spent $58,000 on a new computer system.
“It has enabled us to be more productive with our delivery vehicles,” he said. “We have GPS, we have routing software so our drivers know exactly where to go and the quickest way to get there.”
Stewart’s trims costs by limiting the number of trips it makes to stores that are more than 60 miles away from the company’s warehouse and dairy plant in Greenfield, Saratoga County.
Drivers use tractor trailers with a freezer, cooler and dry food section for long-distance deliveries.
Stewart’s also cuts driving costs by buying all its eggs and milk from farmers who are within 50 miles of the plant.
Between 85 and 90 percent of all products sold in Stewart’s shops are shipped through the company’s warehouse.
Dake believes the warehouse and dairy operation have a big impact on the company’s bottom line–adding a “couple percent” to the net profits. Stewart’s sales totalled $1.2 billion last year, up from about $925 million in 2004. The net profit in each of those years was between 29 and 30 percent.
Joey Champagne has instituted a number of changes to cut fuel costs. He has instructed his drivers to slow their speeds and no longer leave their vehicles idling when they stop for short periods of time.
The trucks average one more mile per gallon when their speed is reduced from 74 mph to 65 mph, Champagne said. It’s a significant savings, considering that the dump trucks get four miles to the gallon.
Some of Champagne’s customers can’t afford the 30-percent fuel surcharge he recently added to their bills, and he is considering hauling the waste shorter distances to help bring down those costs.
Tipping fees are cheaper at the western New York Seneca Meadows and Waterloo landfills he uses compared with others around the state, Internet Sales but $4-a-gallon diesel prices may force him to use dumping facilities closer to home.
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