With unleaded gasoline up 42 cents in a month and diesel up 30 cents, American business is in a quandary: Raise prices and risk losing out to the competition, or keep prices low, and take a hit on profits.
Many feel they've reached the point where they have no choice. From the smallest mom-and-pop shops to the biggest Fortune 500 companies, the jump at the pump is starting to put a squeeze on profits.
At Presidential Limo in Denver, owner Gene Cookenboo says they're now adding a $3 to $4 surcharge on every trip. “In ’01 I spent $100,000 for gas,” Cookenboo says. “In ’05 I spent $183,000. And this year we'll spend $200,000.”
Across town, Preston Loos of EDS Waste says his company is tacking on nearly $2 per house. “We hate to do it, Loos says, “but it's something we have to pass on, because we can't absorb it all ourselves.”
From landscapers to sheet metal shops, small businesses, says Carl Ottosen of the Federation of Small Businesses, are feeling the pinch.
“I mean, every day you're filling your gas tank up, and you can't always pass it on to the customer,” he says.
But it's not just small businesses that are passing the buck to their customers. At trucking giant YRC Worldwide, CEO Bill Zollars says the company’s 20,000 trucks consume a million gallons of fuel a day.
“It would add millions of dollars to cost, and that would come right out of profit,” Zollars says. “It would have a big impact on our business if we didn't have this fuel surcharge in place.”
YRC's fuel surcharge is now running $150 on each $10,000 order.
The surge in jet fuel prices is staggering. Fueling a single Northwest Airlines 747 for the daily run from Detroit to Tokyo is the equivalent of filling up 2,000 SUVs.
Two years ago, it cost $48,000. Today it’s $103,400 — one way!
Which means higher prices for just about everything from those airline tickets to bananas. Today, the average American spends $5.30 out of every $100 on gas or energy. And that's only expected to increase.
It all spells bad news for florist Don Waters in Burbank, Calif.
“Flowers,” he says, “are not a necessity in life, so people will cut back on those first.”
Waters fears passing the buck to his customers could put him out of business.