Gasoline prices have surged more than 10 percent in the past month to $2.11 a gallon nationwide, the government said yesterday. And the latest run-up...
WASHINGTON — Gasoline prices have surged more than 10 percent in the past month to $2.11 a gallon nationwide, the government said yesterday. And the latest run-up in oil futures may lead to even higher prices soon.
Still, motorists don’t seem deterred. Energy Department figures show demand for gasoline has risen about 2 percent from a year ago.
Also, many energy-intensive companies are prospering, thanks to solid economic growth that has allowed them to pass along higher prices to customers.
There are exceptions. Airlines are still losing millions of dollars every day, and small businesses are more likely to absorb the financial hit than raise prices and anger customers.
Overall, executives are relatively upbeat about business despite surging oil prices.
“The outlook is pretty good,” said Shane Pliska, business-development manager for Planterra, a landscaping company that maintains indoor plants for roughly 1,000 companies in the Detroit area. Planterra has seven delivery trucks and 50 or so workers who drive their own vehicles but get reimbursed for mileage.
Light, sweet crude for April delivery slipped 10 cents from its all-time settlement high, set Friday, to close yesterday at $56.62 a barrel on the New York Mercantile Exchange. The average retail price of unleaded regular gasoline rose 5.3 cents last week and is up 21 percent from a year ago, the Energy Department said yesterday.
Business healthyDespite all this, Pliska said business is better today even without asking customers to pay a fuel surcharge.
“We don’t nickel and dime,” Pliska said, noting that profits would, of course, be better if fuel prices were lower.
Bill Zollars, chief executive of Yellow Roadway, the nation’s largest less-than-truckload carrier, is also optimistic about the outlook for business despite the soaring cost of diesel fuel.
Diesel averages $2.24 per gallon, roughly 36 percent more than a year ago. At the current pace, the U.S. trucking industry will spend nearly $15 billion more in 2005, according to the American Trucking Associations.
Still, the industry thrived last year despite an extra $10 billion in diesel costs because of fuel surcharges and strong demand from the retail and manufacturing sectors. For example, earnings at Yellow Roadway, headquartered in Overland Park, Kan., more than quadrupled in 2004 to $184.2 million.
“Most of our customers are just happy to have the demand for their products going up, so paying another 12 percent or so on a fuel surcharge is a lot less of a problem than not being able to sell what you have,” Zollars said.
He said low inflation and low interest rates have also benefited the economy, which has surprised him with its resiliency to the surge in energy costs.
Energy analysts also point out the United States is much more energy-efficient than it was during the global energy shock that followed the 1979 Iranian revolution. They say oil prices would have to surpass $90 a barrel to match inflation-adjusted high set in 1980.
Likewise, gasoline prices would have to climb another $1 per gallon to reach all-time highs.
“What we need to do is keep a very close watch on our other expenses … and hopefully we’ll be able to weather the higher fuel prices,” said Godfrey LeBron, vice president of Paradise Trailways, a charter-bus company in West Hempstead, N.Y., that has raised prices to cover rising diesel costs.
LeBron fears there might come a point where ticket prices rise to a level that begins to sap demand. “But we’re not there yet,” he said.
The main problem for airlines such as Delta Air Lines and American Airlines is that, despite growing demand, they have been unable to raise fares to profitable levels due to intense competition from carriers with much lower costs, such as Southwest Airlines and JetBlue Airways.
Fares cheaper todayEven though jet-fuel prices are up 65 percent from a year ago at $1.59 a gallon, the average one-way price on leisure fares in the 100 busiest routes nationwide is about 14 percent lower than a year ago, according to Harrell Associates in New York.
And even though major carriers have raised ticket prices in recent weeks, the increases are not expected to help the industry, which Wall Street analysts predict could lose as much as $5 billion in 2005.
The package-delivery industry does not appear to be having the same problem.
United Parcel Service initiated its first-ever fuel surcharge for ground deliveries earlier this year and, based on current fuel-price trends, the extra 1.75 percent fee could go up in the months ahead, according to spokesman Norman Black.
For air deliveries, the per-delivery surcharge is 9.5 percent, up from 6.5 percent a year ago.
Black said things could change if economic growth were to slow, but so far UPS remains comfortable with forecasts that call for U.S. gross domestic product to grow 3 to 4 percent in 2005.