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LOGISTICS

Businesses Hit by Rising Gas Prices

Conflicts overseas have caused gas prices to rise, putting the squeeze on consumers and small businesses around the country.
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Political instability in Libya has pushed the price of gas to more than $3.25 per gallon, the highest since October 2008. The recent surge is now putting pressure on already-price-conscious consumers and small businesses that rely on fuel to keep their businesses up and running.

While gas prices have climbed steadily since late last year, many businesses are growing increasingly anxious about the prospects of a sustained rise. For example, Blank Label, a Boston-based start-up that sells customizable men's shirts, has already seen quarterly 10-15 price increases from DHL, their shipping partner, in addition to higher input costs from the rise in price of raw materials. Like many retailers, Blank Label is seeing the rise in the price of gasoline affect their bottom-line. "There's definitely quite a bit of margin pressure," says Fan Bi, the company's founder.

As gas prices rise, shipping goods becomes the most expensive concern to many companies. Michael Rogers, the president of 4 Way Logistics, a freight logistics company in San Ramon, California, says that the rising gas prices have put both transportation carriers as well as businesses in a tight position. "The rise cuts into the carriers and also the people that are buying transportation services," he says. "They're going to be paying more."

While the trucking industry is already facing tighter capacity, higher equipment costs, and greater restrictions on drivers, Rogers says that alternate methods of shipping, like rail, may not prove to be a less expensive shipping method. "Every mode is hit by fuel, whether it's air, LTL, over-the-road trucking," he says. "There's nothing that's not hit."

Higher fuel costs tend to trickle down to consumers, but with the economy still slowly rising out of the recession, many businesses are reluctant to raise prices. Bryon Gongaware, an owner of The Floral Trunk and Gifts in White Bear Lake, Minnesota, told The Washington Post that he has kept his $7 delivery charge constant through the price increase. "I don't think the economy is solid enough that you can be careless about raising prices," he said.

Since the violence in Libya has erupted over a week ago, oil production has decreased by 75 percent to around 400,000 barrels per day from the normal 1.6 million barrels per day, according to the Oil and Gas Journal, one of the world's most widely ready industry publications on the petroleum industry. Libya also holds more than 40 billion barrels of oil reserves, the largest in Africa.

As businesses grow weary over the rising cost of fuel, some experts have seized the opportunity to criticize the country's dependence on crude oil. Many have turned the spotlight on our dependence of Libyan oil to urge lawmakers in Washington to start looking towards clean energy projects—and making investments in the technology that will lead to a more sustainable future.

"Policymakers in Washington have heard the alarm bells and have passed short-term stopgap energy legislation for most of the past decade," wrote Brent Erickson, the executive vice president of the Biotechnology Industry Organization in the National Journal. "But the volatility of oil prices and supplies now could undermine U.S. companies' and consumers' confidence and hamper the business expansion and spending needed for our economic recovery. It's time policymakers recognized that continued reliance on petroleum threatens not only our economy, but also our energy and national security. New outside-the-box thinking is called for."

Last updated: Mar 1, 2011




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