Gas-price pain keeps on giving
Business Courier of Cincinnati - by Lucy May Senior Staff Reporter
If you think ever-rising gas prices amount to little more than some temporary pain at the pump, think again.
A new study by the Applied Economics Research Institute at the University of Cincinnati finds that higher gas prices over the past year could siphon $1.2 billion out of the local economy and cost the region as many as 14,000 jobs. The overall total local economy is $88.2 billion, with total employment of 1.2 million jobs, as of June.
And the impact findings from the institute assume the average, two-car household is paying $2.99 per gallon for regular unleaded. As gas prices creep higher so, too, will the economic price paid by the region. (See chart on page 45.)
"We've been in this prolonged period of price increases, and this is taking a toll," said institute Director Thomas Zinn, who worked with the institute's Tatiana Kosheleva to prepare the study for the Courier.
Even if prices were to drop dramatically, Zinn said, it could take a year or more for the local economy to recover.
The impact is so big because for every extra dollar a household spends on gas, that's one less dollar that can be spent elsewhere. Retail businesses are among the first to feel the effects, Zinn said. But it doesn't take long for that pain to spread to wholesalers and manufacturers, too.
West Chester-based ESJ Carrier Corp. has been feeling it for months. With fuel hovering around $3 per gallon, it now costs the family-owned trucking company roughly 60 cents for every mile its trucks travel.
That's almost double what the drivers themselves make, said ESJ Executive Vice President Sandra Ambrose.
"You re-evaluate everything that you're doing and how you operate your business," Ambrose said.
The company has changed its focus to regional business, asking customers to use ESJ for hauls to Columbus or Cleveland but not to far-away destinations such as Texas. That's because the company knows it will get a fuel surcharge locally but often doesn't get those for longer-distance trips.
ESJ also has been negotiating rate deals with hotel chains to put their drivers up for the night instead of asking them to sleep in their cabs while the trucks are idling to keep the air conditioners on. Keeping a truck running for 10 hours can cost as much as $60, Ambrose said, and the company can give their drivers a better night's sleep for less money in a hotel.
And in recent weeks, ESJ has purchased two auxiliary power units at a cost of about $8,000 each. The units, which operate like generators, can be attached to trucks and keep the rigs running when they're docked instead of burning fuel. If the units save as much money as Ambrose thinks they will, she plans to outfit the rest of her fleet by year's end.
Of course, there are businesses profiting as a result of the high fuel prices.
Hightowers Petroleum Co. in Franklin saw its sales volume triple during the last quarter, said CEO Stephen Hightower. While some of the increased revenue comes from the higher fuel prices, the company also is growing its business because it specializes in supply-chain solutions that reduce clients' fuel costs, he said.
"Before, someone who bought a couple million gallons a year didn't look at themselves a a big player. But today, those couple million gallons (cost) them closer to $6 million as opposed to $2 million two years ago," Hightower said. "It's a great concern to them now when you start talking about supply-chain solutions."
Hightower also has seen increased interest from investors.
"It's a little bit like the dot-com era, where for a while dot-coms were very hot, and you had a lot of investor activity in that business," he said. "It has created a lot of excitement about the industry."
But Hightowers Petroleum does have a trucking fleet of its own, and those costs have gone up for the company just like everyone else's, he said.
For consumers, the high prices have not slowed demand, said Sandra Guile, public relations coordinator for AAA. While people might be trying to combine trips to run errands or buy more essentials in one trip, AAA has not seen travel decline generally, she said.
"If anything, you're watching the impact in your checkbook," Guile said. "You start consciously making decisions on how to spend your dollars, how you can reserve so much per week for your gas tanks."
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