Businesses caught in a fuel fix
Higher gas prices put a pinch on daily work, from flying helicopters to towing cars
Mark Gibson understands what spiraling fuel costs can do to a business that operates trucks and helicopters in price-sensitive industries.
The vice president of Siskiyou Transportation and Timberland's helicopter manager says the twice-a-month fuel bills his companies receive are escalating so rapidly that it's hard to calculate future costs.
When I drove to work the other day and saw the price for a gallon of gas was &
36;2.29, I wondered 'How are we still in business?' Gibson says. Honestly, I don't know what we're going to do. But I know we can't keep absorbing those costs because we're not on huge a margin in the first place.
— Companies burning fuel in the line of duty ' from garbage collectors to fruit growers and landscapers ' have felt the crush of rising oil prices for several months. But now the ripples are crashing into the wholesale and retail markets as escalating shipping costs are passed along.
Ultimately, it will have an impact on the price of doing virtually any kind of business and damage those who operate on the slimmest profit margins.
Southern California truckers have protested diesel prices by parking their rigs in the middle of freeways. Northwest log-truck drivers gathered in Tacoma, Wash., on Tuesday to pressure lumber companies to compensate them for rising fuel rates.
Siskiyou Transportation operates 15 trucks and support vehicles and Timberland flies five helicopters.
We've been headed toward fuel efficiency for a long time, Gibson says. Our trucks are not the (long-haul) over-the-road trucks; sitting there and idling is not an issue with us. On the aviation side, there's not a lot you can do.
Timberland's helicopter fleet operates 2,000 or more hours annually, burning 28 to 30 gallons per hour.
You just can't say we'll drive less, because that's what we do, Gibson says, There aren't a lot of ways to mitigate that cost ' you have to pass it along. But at some point you can't pass it along, you just have to stop work ' especially in the trucking industry there will be a point that if you can't pass it along, it will be cheaper to stop and shut down.
As long as people continue driving and buying cars, Terry Hadley figures his tow trucks and auto transporters will keep rolling.
The general manager of Dick's Towing, an AAA 24-hour roadside service- affiliate in Medford, says his rigs go out on 30 to 50 calls a day and as many as 350 a week.
AAA recently upped its reimbursement rate to cover rising pump prices. Hadley says the company is also upping the transport rates it charges dealers for shipping eight to 10 cars by 10 percent per car.
Usually we like to see if prices come back down, but they're not coming back down, Hadley says.
He says higher fuel costs have contributed to the expense of parts and insurance as well.
It kind of hits you everywhere, Hadley says. Everything has gone up this year.
While AAA's reimbursement increase came at a good time for Dick's, that hasn't been the case for many operators who are already locked into long-term deals and contracts.
It's kicking our rears, says Burl Brim, president of Brim Excavation and Brim Aviation. We have some current construction and aviation contracts where we don't have any way to go back and get more money because we don't have escalation clauses. It's increasing the costs of our services and we're going to have to pass it on to our new contracts.
Brim's standard flying rate has been &
36;640 an hour, but he says that will go up to &
Our turbine helicopters burn 30 gallons an hour, Brim says. When the price of fuel goes up a buck, that's &
36;30. So it's a major item.
For companies whose rates are controlled by franchise agreements with local governments, recouping costs isn't easy. Rogue Disposal operates 30 to 45 trucks daily and they consume between 10,000 and 20,000 gallons of diesel monthly. In the past year, the company's fuel bill has gone up more than 30 percent.
When we get our fuel bill, we put our Night Guard on so our teeth don't grind and we pay it, says Don Cordell, Rogue Disposal's operations manager. If it's a short-term spike, we don't have any way to pass it on to our customers.
He says current diesel prices probably won't have an impact when the company's franchise agreement is reviewed with the city this summer, but if prices remain high, it will be dealt with in the future.
In crowded and competitive fields such as landscape and yard care, belt-tightening is often the order of the day.
It's definitely hitting my pocketbook, says Steve Cutts, who has been in the landscape business since the 1970s.
The power tools that Cutts' six-man crew uses are currently consuming &
36;70 worth of fuel each week.
All those things eat up more than one of my trucks by 50 percent ' they don't get the mileage of a Ford truck because everything is so high-RPM, he said.
Cutts has found some small ways to scale back, like sending one truck instead of two to handle Jacksonville customers.
I'd like to say I've come up with some clever ideas, Cutts says. Unfortunately, I can't change much.
Bobbio's Pizza owner Tom Brown is used to seeing price increases when Vistar/VSA delivers his weekly supplies at his White City pizza parlor, but he received an unusual notice with his most recent shipment.
The supplier is starting to add a surcharge according to the price of diesel, says Brown, who has owned Bobbio's since 1989.
That's especially unwelcome news, given the competition for the pizza dollar among about 30 parlors in Jackson County.
The supply and demand for pizza here is such that I can't pass on the costs to customers and still be competitive, Brown says. So, I'm taking it in the you know what.
Most pizzerias factor delivery costs into their price structure, but Brown says he's hesitant to unilaterally boost prices.
Another variable for restaurants is that they are dependent on their customers' disposable income. As gas pumps suck more money from checking accounts and wallets, there is less to spend eating out.
I've been talking to people at the Abby's out here and their business has been slow and ours has been slow, Brown says. Maybe it's because of the time, I don't know.
Supermarket produce sections will also reflect higher freight rates.
Although fuel costs account for only 2 to — percent of gross orchard operation costs, Scott Martinez, sales operations manager at Associated Fruit in Phoenix, says oil prices will affect what consumers pay for fruit at the store.
The buyer is going to bear freight rate increases that are passed along for fruit and vegetables in the store. Martinez says. There will definitely be a change at retail.
Reach reporter Greg Stiles at 776-4463 or e-mail