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Higher gas prices taking big bite
out of profits, services

Katherine Jones
The Idaho Statesman

Eric Graff is a delivery driver at Flying Pie Pizzaria – except on the days that he rolls balls of pizza dough. “It´s pretty outrageous,” he says about the price of gas. “It gets harder and harder, but there´s nothing I can do about it.” He gets paid by the hour, plus $1.13 per trip, which is OK unless the delivery is a long way away. “Plus tips, that helps.”

Treasure Valley motorists aren´t the only ones suffering through the recent surge in petroleum prices.

Area businesses say the decision by the Organization of Petroleum Exporting Countries (OPEC) to scale back oil production by an additional 4 percent is going to do more than just drive local gasoline costs to historic levels.

Just about everything that comes to the Treasure Valley is brought here by truck, and much of what we buy is made from petrochemicals that cost more when the price of oil goes up.

Experts already see gas prices ricocheting throughout the public and private sectors, driving up the cost of services and products, curbing consumer spending and threatening employment gains in Idaho.

“As companies have to absorb these higher energy costs, it could diminish that (job growth) momentum,” says Wells Fargo economist Kelly Matthews. “Combined with the impact on consumers, that could put a damper on the recovery.”

Things don´t figure to get any better.

At week´s end (April 2, 3), Idaho´s average price in the daily American Automobile Association survey was fifth-highest in the nation at $1.83 a gallon for regular unleaded. Boise´s average price slipped to $1.83.8 from a record $1.84.5 earlier in the week.

So far, pump prices have not affected the price of a pizza at two Flying Pie Pizzarias in Boise, or what the company charges for delivery. But that doesn´t mean it won´t happen, said owner Howard Olivier, adding that the suppliers of ingredients have added freight surcharges to their contracts in recent years to cover fuel expenses.

If diesel fuel reaches $2 a gallon (it sells for about $1.81 now), his supplier will add $1.50 to the bill for each delivery.

If gas prices continue to climb, easing the financial strain on his drivers without boosting pizza prices could mean hiking the $1.50 delivery charge. Olivier worries that could be a risky strategy if consumers balk at the higher fee.

“We could either raise our delivery charge or stop offering delivery,” Olivier said. “There comes a point beyond which I can´t make magic.”

Elsewhere, it´s costing Action Couriers $1,800 a month more, or almost $12,000 a month, to keep a fleet of 32 vehicles on the road.

A 6 percent fuel surcharge to customers has eased some of the pain. But with even higher gas prices expected this summer, layoffs among the company´s 48 employees are a possibility, says owner Mike McGrath, who doesn´t think his customers would stand any additional charges.

“Our profits have dropped, and we´re potentially looking at $2-a-gallon prices,” McGrath said. “At that point, we would have to make changes structurally. There´s no way we could continue to operate at those prices.”

The Boise School District also is taking a beating on fuel costs. The district contracts for 130 school buses to ferry about 6,500 students to and from school each day. It pays $188 per day per route to the bus company, Laidlaw Education Services. However, the contract stipulates that if the price of diesel fuel increases more than 5 cents beyond a certain point, the district has to reimburse the contractor.

From Feb. 1 to March 4, diesel went from 55 cents a gallon to $1.14 a gallon. That added $56,000 to the cost of providing bus service. It´s money that will have to come out of the district´s budget, says transportation supervisor Sarah Stobough.

As the cost of petrochemicals has increased, so has the price of petroleum-based carpeting and vinyl flooring. Manufacturers have hiked the cost of their products three times this year, with increases ranging from 8 to 18 percent, says Discount Carpets owner Kay Hamilton.

“This industry is heavily reliant on petroleum,” said Hamilton, who purchased extra inventory to stay ahead of price increases. “I tried not to put it on the customer, but now I don´t have a choice. I´m almost out of all that stuff, and customers are starting to freak.”

The cost of her vinyl flooring also has gone through the roof. Most recently, the cost for one of Hamilton´s popular Aurora vinyl flooring went from $9.31 a square yard to $10.45, an increase of $1.14 for a product that in the past saw increases in pennies, she said.

Taxi drivers also are feeling the impact of rising gasoline prices. Cabbies are independent contractors who lease their vehicles from the companies and must return them at the end of each shift with a full tank of gas. Cab rates are set by the city of Boise, and drivers must buy the gas with the money they make on fares.

“And we don´t make that much money driving a cab,” said Mike Murphy, a transplanted New Yorker who pays Boise City Taxi $77 a day. “There are days when you´re going to lose money, because this (price of gas) is just cutting too deep into our pockets.”

Murphy blames the Boise City Council for not authorizing an increase in the $2.20 charge each time a driver drops the flag, or the subsequent $1.90 per-mile charge.

Even higher gasoline prices are apparently in the offing.

Charlie Jones, co-owner of 45 Stinker gas stations in Idaho, including 22 in the Treasure Valley, said Sinclair, his supplier, has warned him to brace for $2 a gallon by summer.

The morning after OPEC´s announcement, the wholesale price retailers pay for their gasoline increased as much as 3 cents a gallon, Jones said.

“It´s not the retailer who´s making a zillion dollars,” Jones said. “It used to be that for our wholesale price to move upward 1 cent a gallon in a week was a lot. Now it´s not uncommon for it to move up 3 cents to 7 cents overnight.”
One immediate concern as summer approaches is the effect higher gasoline prices will have on tourism, a $2.2 billion industry that attracts 21.5 million vacationers to Idaho each year.

Ironically, sky-high gasoline costs may actually help tourism by convincing state residents to vacation closer to home, and residents of neighboring states to put off any long-distance travel in favor of “just going camping in Idaho,” said Carl Wilgus, administrator of the Idaho Division of Tourism Development.

Boise resident Erica Irminger says her family will put off a trip to Salt Lake City this summer because of the price of gasoline.

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