Gas costs have businesses pondering prices

www.galvnews.com By Laura Elder The Daily News Published March 16, 2003

As gasoline prices resume their upward march, League City business owner James Barry has to make a tough decision: Cut into profits or pass fuel costs on to customers. “Our strategy at present is to hold the line,” said Barry, president and founder of League City-based Doctor Cool & Professor Heat, a heating, ventilation and air conditioning company with eight trucks that need constant fueling. “I’m a member of Air Conditioning Contractors of America, and we speak back and forth about costs. Some of them are adding a fuel charge but at present, we don’t expect to.” Absorbing the rising fuel cost has to hurt. The bill to fill up his fleet has risen 25 percent compared with last year, Barry said. In January last year the company paid $456 to gas up trucks. This year, for the same month, Doctor Cool paid $570. Climb And Dwindle While Barry isn’t increasing prices, other companies say they can’t afford to absorb fuel costs much longer if pump prices continue to rise. And that would mean a double whammy for consumers, who are watching their disposable income dwindle with every gas price uptick. This week, after a short period of relative stability, the price for a gallon of regular, unleaded gasoline jumped to $1.609 in the area, which is 2.1 cents higher than last week’s level. The Texas average is $1.608, which is 2.1 cents higher than last week’s prices, six cents above the price last month and 43 cents higher for the same period last year. “Consumer demand for gasoline remains high, and inventories of oil and gasoline are very low,” said Carol Thorp, spokeswoman for the American Automobile Association. “Unless consumer demand goes down, it’s likely we’ll see higher pump prices for the next few weeks.” Gas prices closely track oil prices, which have been pushed up sharply in recent months (up more than 50 percent since mid-November) by generally falling commercial crude oil inventories in the United States, a colder-than-normal winter in the U.S. Northeast, which spiked demand, and continued fears that a war with Iraq could disrupt Middle Eastern oil supplies, say officials with the Energy Information Administration, an agency of the U.S. Department of Energy. Global Cause, Local Effect Consumers and businesses are getting a hard lesson in how global politics can cut into the bottom line. Vivian Dollar, a Pasadena resident who commutes to her League City job in a Mercury Mountaineer, said that before gas prices climbed, she was spending about $22 to fill the tank of her SUV. Now it costs about $30. “There’s nothing to do except complain, and no one is listening,” Dollar said. “You can’t give up going to work. As long as war is hanging over our heads, nobody really knows what to do.” War And Strife Oil markets fear that a U.S. war with Iraq, while Venezuelan oil exports remain far below normal levels, could strain the world’s existing spare oil output capacity (estimated at 1.5 million to 2 million barrels a day) to its limit, say EIA officials. Nearly all the excess capacity is in OPEC member countries, particularly Saudi Arabia (800,000 to 1.3 million barrels a day), the United Arab Emirates (350,000 barrels a day) and Qatar (110,000 barrels a day), all of which are located in the Persian Gulf. The International Energy Agency, the watchdog for major consuming countries, has said that OPEC lacks enough capacity to compensate quickly should there be a loss of Iraqi and Kuwaiti oil. In its monthly report, the IEA stated that the global oil system was “running on empty” and that a further supply disruption would “tax a system running close to capacity.” But Saudi Oil Minister Ali al-Naimi has said repeatedly he was confident OPEC and Saudi Arabia would deliver more oil in case of war in Iraq, say EIA officials. The Venezuelan Factor So far, mediation efforts have failed to resolve a strike in Venezuela, now in its fourth month. A prolonged strike in that country was meant to topple President Hugo Chavez. More than one-third of workers at Petroleos de Venezuela, the state-run oil company, were fired since the beginning of the strike, and won’t be rehired, Chavez has said. Venezuela is the fourth-largest supplier of crude oil to the United States. Iraq is the world’s eighth largest oil exporter. Big Shipment Crude oil prices fell Friday on reports that Saudi Arabia’s state-run oil company, Saudi Aramco, had chartered supertankers to carry an exceptionally large shipment of crude — 28 million barrels — to the United States for delivery in May. April contracts of U.S. light sweet crude tumbled by more than $2 a barrel Friday in New York before rebounding somewhat to close at $35.38, down 63 cents from Thursday’s close. Thinking About Rethinking Sandra Strickland, a manager at League City’s Galey’s Florist & Gifts, said eight out of 10 orders include deliveries. Galey’s has one van, and gives the driver about $40 to fill the up the vehicle’s tank twice a week. But that fuel allowance doesn’t stretch too far these days, Strickland said. As it stands, the florist charges about $7 for local delivery. And like Barry, Strickland doesn’t want to pass on fuel costs to customers. Two years ago, when refinery outages around the nation caused tight gasoline supplies to push up pump prices, Galey’s did raise delivery fees. If gas prices go much higher, the floral shop may have to again seek relief. “Every morning it seems like the gas prices are a little higher,” Strickland said. “If it gets to $1.75 a gallon, we’d have to rethink.” Debbie Roberts, owner of Stafford-based Executive Mail Couriers, does a lot of business with The University of Texas Medical Branch and Shriners Burn Institute. The courier transfers skin tissues to the institute at least twice a week. Executive Mail Couriers subcontractors have to pay for their own gas. “They’re screaming,” Roberts said. Two weeks ago, the company increased prices by 20 percent to help the drivers, charging $76 for a Houston to Galveston delivery. Pain At The Pump With nine shuttle vans and five minibuses traveling to both Houston airports daily, Galveston Limousine Service is feeling the pain at the pumps. Dispatcher Pat Kitchell has instructed drivers not to leave a airport without passengers, and to fill the shuttle vans to capacity. Galveston Limousine hasn’t raised its prices, Kitchell said. “We try our best to stay competitive with other markets,” he said.