IBJNews

Rising pump prices rattle drivers, businesses

Back to TopCommentsE-mailPrintBookmark and Share

High fuel prices are putting the squeeze on drivers' wallets just as they are starting to feel better about the economy. They're also forcing tough choices on small-business owners who are loathe to charge more for fear of losing cost-conscious customers.

Gasoline prices rose 4 percent last week to a national average of $3.29 per gallon. That's the highest level ever for this time of year, when prices are typically low. And with unrest in the Middle East and North Africa lifting the price of oil to the $100-a-barrel range, analysts say pump prices are likely headed higher.

For every 25-cent increase in the price of gasoline, the nation spends an extra $3 billion filling up its cars and trucks, Kloza says.

For Jay Ricker, who owns 51 convenience stores in Indiana that sell gasoline under BP and Marathon brands, that's less money for the "affordable luxuries" he offers — cappuccinos and candy bars that people enjoy, but can do without.

"I hate these high prices," said Ricker, CEO of Anderson-based Ricker Oil Co. "People don't want to come in and buy something I make money off."

Bryon Gongaware, an owner of The Floral Trunk and Gifts in White Bear Lake, Minn., didn't raise his $7 flower delivery charge when gas prices spiked in 2008, and he doesn't plan to do so this time, either.

"I don't think the economy is solid enough that you can be careless about raising prices," he said, standing among the flower clippings on the floor of the shop he has run for 21 years.

That means the extra costs that come from driving the store's delivery van 70,000 miles a year come from only one place: "right out of the bottom line," he said.

For drivers such as Robert Wagner, 51, a high school teacher from Thornton, Colo., the higher fuel costs mean cutting back on movies and dinners out for him, his wife and their two children. "We're very, very frugal right now," he said as he trickled enough $3.09-per-gallon gasoline into his Chevrolet Suburban to get him to his next pay day.

Analysts and economists worry that by lowering profits for businesses and reducing disposable income for drivers, high gasoline prices could slow the recovering economy.

Over a year, analysts estimate, oil at $100 a barrel would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. Rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That would likely mean less hiring and higher unemployment.

Americans are less prepared to absorb the spike in gasoline prices than they were the last time prices rose this high, in 2008, because unemployment is higher and real estate values are lower, says David Portalatin, an analyst for the market research firm NPD Group.

It has been four months since gasoline rose beyond $3 per gallon. During that time, drivers have spent $14 billion more on gasoline than they did a year ago, Portalatin says.

Diane Swonk, chief economist at Mesirow Financial in Chicago, says this year's cut in payroll taxes offers consumers a buffer against higher fuel prices. Still, she expects all but the wealthiest Americans to cut back on discretionary spending. And the longer prices stay high, the more damage they do.

Gasoline prices rose throughout last fall as the developing nations of Asia and the recovering economies of the West began using more oil.

In recent weeks, upheaval in the Middle East and North Africa stoked fears that oil supplies would be disrupted, and oil prices exceeded $100 per barrel for only the second time in history.

Much of the most dramatic unrest took place in countries that are not big producers of oil. But when Libya plunged into chaos, there were disruptions in shipments of its high-quality crude, which is well-suited to making gasoline. That sent refiners scrambling to find other sources of high-quality oil. Gasoline prices rose further.

Gasoline prices typically fall in the winter and rise in the spring as refiners switch to more expensive summer blends of gasoline. Since 2000, prices in May have been 52 cents per gallon on average higher than in February, according to the Energy Information Administration.

Tom Kloza, chief oil analyst at the Oil Price Information Service, believes that the normal seasonal rise in prices has been pulled ahead by events in the Middle East, but he still expects prices to rise further. He predicts prices will reach $3.50 to $3.75 per gallon, barring more chaos in the Middle East.

"When we get over $3.75 we are looking at very serious consequences for the economy," he says.

Drivers often get angry when gasoline prices spike for reasons that aren't apparent, such as refinery problems or overseas demand for oil.

This time, though, the dramatic news reports from the Middle East are making customers more understanding, says Scott Hartman, CEO of Rutter's Farm Stores, which owns 56 convenience stores and gas stations near Harrisburg, York and Lancaster, Pa.

"Whenever you see chaos in the Middle East, people expect higher prices, and this has been more widespread than most of us have seen in our lifetimes," he says. "It's quite clear our customers know what's going on."

That doesn't mean they like it.

When asked about fuel prices at a RaceTrac service station in Dallas, Shaun DuFresne tapped the screen on the pump, showing he had just spent $90.14 for diesel — at $3.50 a gallon — to fill his 2006 Ford F-250 pickup truck. Then he said something unprintable.

ADVERTISEMENT

  • Something to think about
    Guess what, Tina, Wilbur, and JP...there are some people who actually have children and need a larger vehicle. There are others who have a truck or van for purposes of needing a truck or van (self explanatory). Many people can't afford to go buy a new car which gets 30 mpg; some of us do keep our vehicles for a decade or more. Dependence on foreign oil is a dangerous thing, and that should be evident with the constant turmoil in the middle east. Suburban sprawl? Are we all supposed to sell our homes and move downtown somewhere? All of us don't work downtown. There is enough oil in America for Americans. No, we all don't need large vehicles, but it is really arrogant and even ignorant to continually judge and make fun of all those who do drive larger vehicles, without even knowing their situations. If you can drive a smart car or ride a bicycle everywhere you go, do it. Not all of us can, or even want to.
  • LOL
    And the other guy filled up his F-220...enough said...$5 gas price would actually be helpful in the long run (lower our dependency on oil by forcing people to downsize their cars, stop suburban sprawl, etc), although it would be harmful in the short-run (especially now).
  • Comedic Timing
    @Tina the writer of this article just has really good comedic timing. I bet this guy really rides a scooter. I mean, nobody in their right mind drives a suburban anymore.
  • Suburban? Really?!
    '"We're very, very frugal right now," he said as he trickled enough $3.09-per-gallon gasoline into his Chevrolet Suburban to get him to his next pay day'... we have to admit that, in part, we bring this situation on ourselves.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. I had read earlier this spring that Noodles & Co was going to open in the Fishers Marketplace (which is SR 37 and 131st St, not 141st St, just FYI). Any word on that? Also, do you happen to know what is being built in Carmel at Pennsylvania and Old Meridian? May just be an office building but I'm not sure.

  2. I'm sorry, but you are flat out wrong. There are few tracks in the world with the history of IMS and probably NO OTHER as widely known and recognized. I don't care what you think about the stat of Indy Car racing, these are pretty hard things to dispute.

  3. Also wondering if there is an update on the Brockway Pub-Danny Boy restaurant/taproom that was planned for the village as well?

  4. Why does the majority get to trample on the rights of the minority? You do realize that banning gay marriage does not rid the world of gay people, right? They are still going to be around and they are still going to continue to exist. The best way to get it all out of the spotlight? LEGALIZE IT! If gay marriage is legal, they will get to stop trying to push for it and you will get to stop seeing it all over the news. Why do Christians get to decide what is moral?? Why do you get to push your religion on others? How would legalizing gay marriage expose their lifestyle to your children? By the way, their lifestyle is going to continue whether gay marriage is legalized or not. It's been legal in Canada for quite a while now and they seem to be doing just fine. What about actual rules handed down by God? What about not working on Sundays? What about obeying your parents? What about adultery? These are in the 10 Commandments, the most important of God's rules. Yet they are all perfectly legal. What about divorce? Only God is allowed to dissolve a marriage so why don't you work hard to get divorce banned? Why do you get to pick and choose the parts of the Bible you care about?

  5. Look at the bright side. With the new Lowe's call center, that means 1000 jobs at $10 bucks an hour. IMS has to be drooling over all that disposable income. If those employees can save all their extra money after bills, in five years they can go to the race LIVE. Can you say attendance boost?

ADVERTISEMENT