Articles

Rising Prices at the Pump: Small Business Owners Have Had Their Fill

by Patricia Schaefer

Paula Adam is the owner and director of A.OK Driving School in Abilene, Texas. According to Adam, every driving school in Texas is hurting because of rising gasoline prices, and hers in no exception. If gas prices go much higher, says Adam, she fears her beloved business may go under.

Adam is just one of many small business owners throughout the United States who have been coping for years with rising gasoline prices. Business Know-How recently interviewed a number of these business owners. They shared their heartfelt concerns and also how they've managed thus far to keep their businesses afloat amidst rising prices.

We've also provided some measures small business owners can take to not only conserve gasoline and increase fuel efficiency today, but also to help lesson dependency on foreign oil in the future.

Why are Gasoline Prices So High?

"Why is it so high? I just don't understand," said Yard Guards on Doody owner and president Cheresee Rehart about the cost of gasoline. This "pooper-scooper" business owner echoed the sentiments of other small business owners we spoke with. In their voices is the palpable pain of feeling somewhat helpless, confused and overwhelmed with a threat to their business that they don't totally understand.

I went to Doug MacIntyre, Senior Oil Market Analyst with the Energy Information Administration (EIA), for an answer. EIA was established by Congress with the "intent to prepare policy neutral reports while fulfilling its role as an integrated office within the Department of Energy." MacIntyre stressed the importance of their neutral stance.

MacIntyre pointed me to a report released in May of 2007 in which the EIA answers the question, "Why are gasoline prices so high?" EIA reports that "gasoline inventories have recently been drawn down at a dramatic rate to bridge the gap between supply and demand. Over 12 consecutive weeks during February, March, and April, total gasoline inventories declined by a cumulative total of more than 34 million barrels (15 percent). This is the sharpest decline in gasoline inventories over a consecutive 12-week period in EIA's recorded historical data.

"Lower import levels than last year and numerous refinery outages, due to both maintenance and unexpected incidents, have slowed supply growth, while at the same time, demand continues to grow, even with prices around $3 per gallon. While demand growth has slowed somewhat in recent weeks, over the four-week period ending May 11, preliminary data suggests that gasoline demand is still 1.0 (or nearly 100,000 barrels per day) greater than year-ago levels."

Amidst these reported supply and demand problems, and at the same time many small business owners have been struggling to keep us with escalating gas prices, oil giants like Exxon Mobil have been raking in record-breaking profits. 2005 saw Exxon Mobil reap profits of $36.1 billion -- the most profits of any U.S. company in history. It actually broke its own record in 2006 with profits of $39.5 billion. Energy company CEO's have also enjoyed skyrocketing pay and compensation, often with most of their pay from exercised stock options, and some with total yearly compensation that tops $300 million.

In response to these record profits and stratospheric earnings, political pressure has been mounting for action against what many citizens consider out-and-out price gouging. Proposals recommended include a tax on windfall profits and investigations into refinery stoppages. This May, the House approved legislation that would outlaw gasoline price gouging. If signed into law, the measure would be the first federal law against price gouging at the pump. Penalties would consist of up to $150 million for companies, and up to $2 million and 10 years of imprisonment for individuals.

What Can Small Businesses Do?

What's a small business owner to do today in the face of high gasoline prices that MacIntyre of the Energy Information Administration says are here to stay? According to MacIntyre himself, it boils down to two things: conservation of gasoline, and passing some of the higher costs onto customers.

Here's a sampling of what some of our nation's small business owners are doing to combat rising prices at the pump:

Paula Adam, Owner and Director
A.OK Driving School, Abilene, Texas
Adam's driving school has been in business for ten years. She's employed a host of ways to compensate for rising gasoline prices. They include:

• Charging a gasoline surcharge of $10
• Buying only Honda Civics.

One reason: great gas mileage

• Cutting back on advertising
• During "slow" season, takes a number of company vehicles off the road to save on insurance costs.

Don Waters, Co-Owner Citrus Valley Florist, Covina, California
When Business Know-How last spoke to Waters in 2005, he had just raised their delivery fee from $6.00, to anywhere from $7.00 to $10.00, depending on the distance. "Even then," Waters said at the time, "this no longer covers our delivery expenses."

Today, this is what Waters had to say: "We have been putting off the increase of delivery charges; however, last Friday we were forced to raise our delivery [charges] to some of our delivery areas from $10.00 to $12.00; these areas include San Dimas, La Verne, Glendora and Irwindale. We are hoping not to have to raise our charges to the remainder of our delivery area. Each day the gas prices go up our profits decline."

Cheresee Rehart, Owner and President
Yard Guards on Doody, Riverview, Florida
Rehart is the proud owner of a pooper-scooping business. Their motto: "We take Crap ... Seriously!" She's also the vice-president of the Association of Professional Animal Waste Specialists (aPaws). Here's a few ways Rehart has saved on gasoline costs:

• Goes to landfill once every two weeks instead of once a week.
• Schedules a "tight" route.
• Limits service zone to smaller geographic area.
• Now charges customers a "service charge" which is essentially a gas surcharge
• Is increasing price of some ancillary services (to help compensate for higher gas prices)

Some Ways to Conserve Gasoline & Improve Fuel Efficiency

From the U.S. Department of Energy:

1. Slow down

• Each 5 mph you drive over 60 mph is like paying an additional $0.15 per gallon for gas.
• Aggressive driving (speeding, rapid acceleration and braking) wastes gas.

Equivalent Gasoline Savings: $.12 - $.82/gallon. 2. Keep your vehicles maintained and running smoothly.

• Tune-ups
• Clean air filters
• Tires properly inflated
• Proper grade of oil

3. Use your engine wisely.

• Avoid Excessive Idling
• Use Cruise Control and overdrive gears

4. Be smart about driving.

• Plan errands and deliveries so that you do them together, rather than separate trips
• Carpool
• Mass transit
• Telecommute

5. Keep your vehicles light.

• Too often vehicles become long-term storage facilities

From the Energy Information Administration:

Americans make up less than five percent of the world's population, yet own one third of its automobiles. Over the next 20 years, our dependence on foreign oil could be almost completely eliminated if the average fuel economy increases to 45 mpg instead of 25 mpg. Today, 50 percent of the new passenger vehicles sold are SUVs and light trucks that do not have to meet the higher fuel economy standards of cars.

When buying a vehicle, you can save a lot by choosing a fuel-efficient model. All new cars must display a mileage performance label, or Fuel Economy Label, that lists the estimated miles per gallon for both city and highway driving. Compare the fuel economy of the vehicles you are considering and make it a priority. Over the 13-year life of the vehicle, you can save thousands of dollars and reduce emissions significantly.

For Model Year 2007, the Environmental Protection Agency (EPA) lists the following vehicles as the top ten fuel economy leaders:

	Manufacturer/Model	MPG City / Highway
1.	Toyota Prius (hybrid-electric)	60/51
2.	Honda Civic Hybrid	49/51
3.	Toyota Camry Hybrid	40/38
4.	Ford Escape Hybrid FWD	36/31
5.	Toyota Yaris (manual)	34/40
6.	Toyota Yaris (automatic)	34/39
7.	Honda Fit (manual)	33/38
8.	Toyota Corolla (manual)	32/41
9.	Hyundai Accent (manual)	32/35
	Kia Rio (manual)	32/35
10.	Ford Escape Hybrid 4WD	32/29
	Mercury Mariner Hybrid 4WD	32/29

This message from the EPA begs to be repeated and noted: Over the next 20 years, our dependence on foreign oil could be almost completely eliminated if the average fuel economy increases to 45 mpg instead of 25 mpg. When buying a vehicle, you can also save a lot by choosing a fuel-efficient model.

Small business owners like Adam, who owns a fleet of six Honda Civics, is helping to make this a reality. So are people like New York City Mayor Michael Bloomberg who just this May ordered all 13,000 city taxis to be hybrid by the end of 2012.

Across the country, our millions of business owners -- both large and small -- may not be able to affect the supply of gasoline, but certainly they can be empowered and take action to affect its demand.

Copyright 2007, Attard Communications, Inc. Patricia Schaefer is a staff writer for Business Know-How. She can be reached by email at pschaefer@businessknowhow.com