Prices at pump soaring
Records fell across Nevada and the United States as fuel costs reached all-time highs Monday.
A gallon of regular unleaded gasoline averaged $3.20 in Las Vegas, as Nevada’s average reached $3.26, travel club AAA reported. Reno’s average came in at $3.39, and prices nationwide averaged $3.19.
The higher gasoline prices are sending local businesses scrambling to cover the soaring costs with measures ranging from higher delivery fees to lower wages.
At Big Traffic Mobile Billboards Worldwide, gasoline expenditures have jumped 9.5 percent since January, to about $7,000 a month, Chief Executive Officer Marla Letizia said.
"Prices are the highest they’ve ever been, and it’s taken us a little bit by surprise," said Letizia, whose company operates 11 light-duty diesel trucks that tow 200-square-foot billboards advertising casinos, condominium developers, Strip shows, car dealers and sandwich shops.
"We’re just taking it in the ankle," Letizia said. "You just have to deal with it."
The company’s clients probably would reject fuel surcharges, Letizia said, and Big Traffic is paring costs instead of upping transportation fees.
The company is hiring part-time drivers to limit the overtime its employees can take. Letizia said she doesn’t like the new policy — the company offers overtime as a reward for its long-term workers — but spring’s fuel costs make the move necessary.
If gasoline costs continue their upward march, Letizia will consider broaching fuel surcharges with her clients.
Pricey gasoline could push up driving charges at Great American Cookies.
Owner Michael Solomon increased delivery fees from $7 to $10 per trip just before the springtime spike in gasoline prices. If costs do not stabilize in the next month or so, he will weigh another boost, to about $12.50.
The effects of expensive fuel have cascaded through Solomon’s business, starting with a decline in foot traffic inside the local malls where Great American Cookies has outposts. Solomon first noticed the customer falloff in mid-April.
"We may have a slow week from time to time, but we’ve had two and three and four weeks with slower business," said Solomon, whose stores are inside the Galleria at Sunset mall and the Las Vegas Outlet Center. "When Mother’s Day came around and it wasn’t so busy, that’s when we really noticed. Mother’s Day is a big holiday for malls, with a lot of traffic. But traffic was down."
Thus, sales at Great American Cookies are off about 2 percent in 2007. And because the business is selling fewer baked goods, it’s importing fewer raw materials for its products. The smaller freight load, with higher gasoline prices, has tacked on 20 percent to the company’s trucking bill this spring, Solomon said.
If business owners and their consumers are hoping for a break from higher costs, they will have to wait: Gasoline prices will rise a bit more before they level off after Memorial Day, experts said.
Fuel costs set records Saturday, Sunday and Monday, and they could climb to new heights each day through Memorial Day, said Michael Geeser, a spokesman for AAA.
Operational interruptions at the refineries that convert crude oil into gasoline are partly behind higher outlays at the pump, Geeser said. Some plants shuttered for seasonal maintenance stayed closed longer than refiners expected, as glitches emerged during servicing.
"To boil it down, there’s simply a problem with the refining infrastructure in this country," Geeser said. "It doesn’t appear there is a problem with the oil supply. They just can’t refine enough gasoline for American demand, and that’s causing problems everywhere."
Also pressuring prices: strong demand for fuel through the winter, said Denton Cinquegrana, West Coast markets editor for the Oil Price Information Service in New Jersey.
Weekly demand for fuel in the United States was 1.9 percent higher in April than demand in the same month a year earlier, according to the federal Energy Information Administration, and total petroleum consumption rose 2.6 percent in the first quarter when compared with the first quarter of 2006.
"This (price) rally has been brewing since January," Cinquegrana said.
Cinquegrana and Geeser predict that prices will stabilize next week, once the Memorial Day spurt in fuel use eases. Plus, gasoline and oil imports into the United States will increase in coming weeks as overseas suppliers look to capitalize on the country’s high fuel prices.
Neither expert would predict sizable price declines: Geeser said the need for fuel is likely to stay strong through the summer, and Cinquegrana said the Las Vegas market is vulnerable to supply problems because it has just one pipeline delivering gasoline to the market.
Both Letizia and Solomon said their businesses will thrive even if gasoline costs do not drop noticeably in the next few weeks.
Big Traffic is 6 years old, so Letizia is a veteran at adjusting to summer jumps in fuel costs. Lower gasoline prices in the winter even out higher expenses in warmer months. And major gains in fuel costs have driven smaller competitors of Big Traffic out of business.
"We’ll weather this," Letizia said. "We’ve been in business far too long, and we understand how this all works. We’ve watched this occur every single year: Prices go up, then they go down. It’s just a normal part of the cost of a commodity at this time of the year."
Solomon is using new promotional efforts and old-fashioned patience to guide Great American Cookies through its sales dip.
The company is making its samples bigger, luring consumers with smaller, intact cookies rather than small chunks of full-sized products. Great American Cookies converts 5 percent of a mall’s traffic into customers, and Solomon hopes the upgraded samples will improve that rate to 7 percent.
Solomon expects consumers will return to their spending habits after the sticker shock of higher fuel prices has worn off and after the country’s supply kinks smooth out over the summer, steadying prices in coming months.
Great American Cookies continues to do brisk business in specialty products, with sweets lovers still snapping up the company’s $20 cookie cakes in solid numbers.
"The bottom line for us is that higher gas prices just mean that we have to run our business more efficiently," Solomon said.
