Potomac News Online | The Gas Pump Blues
Steve Papoulakos, who manages Vogue Flowers, has gasoline as well as gardenias on his mind this spring.
Vogue, which operates 12 delivery trucks, has absorbed rising gasoline costs rather than raise its $6.95 delivery charge.
“The cost of gasoline certainly affects our bottom line,” Papoulakos said.
That cost – more than $2 a gallon for regular, self-serve gas – is creating financial worry for individuals and businesses.
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Some consumers may already be changing their driving habits.
Students who commute, for example, are feeling the pressure of higher prices. At J. Sargeant Reynolds Community College, several students have mentioned higher gasoline prices as part of their reason for applying for financial aid, said Malcom Holmes, the school’s director of marketing and public relations.
Janet Johnson, a Hopewell resident who works in Richmond, takes night and weekend classes at Reynolds and John Tyler Community College. She can afford the higher gasoline prices, Johnson said, but twice a week she drives her four-cylinder Buick and leaves her Chevrolet Blazer parked at home.
When she has to run an errand, she tries to make her trips cover two or three chores, not just one. The next vehicle she buys will definitely be more fuel efficient, she said.
In an Associated Press-AOL poll released last week, 51 percent of Americans surveyed said if gas prices remain at high levels for the next six months, it would create a financial hardship, and 30 percent called the situation serious.
Gasoline prices dropped from season highs recently as the price of crude oil, the raw material from which gasoline and diesel fuel are made, dropped slightly. Crude, however, has since rebounded and rose more than 6 percent last week, to close at $55.39 a barrel on the New York Mercantile Exchange. The gain for the week was the biggest rally in three months.
The conventional wisdom is that $2-plus gasoline will be a fact of life at least through the summer months.
Gasoline prices can vary from state to state, in regions of a state and even from one city block to another. Price differences occur for various reasons, including the driving season, competition between retailers, and changes in the price of crude oil.
Regular gasoline prices averaged $2.14 across Virginia and $2.13 in the Richmond metro area Thursday, according to AAA Mid-Atlantic. The Richmond average is 32 cents higher than on March 1 and compares with an average price of $1.68 per gallon a year ago.
The sharp rise in price means companies that depend on deliveries as a key part of their customer service are having to pass along the increased cost of gasoline to consumers or, like Vogue Flowers, are doing their best to absorb the higher costs.
Matt Sanders, operating partner of PJ United Inc., which owns and operates 41 Papa John’s Pizza restaurants in eastern and central Virginia, said the higher gasoline prices have hurt his company’s profit. Getting supplies costs more, and the company has had to pay its delivery drivers more, he said.
Sanders said he has not passed the added costs on to customers, but if prices go higher Papa John’s, like other businesses, may have to make some changes. “Consumers perceive delivery charges as negative. It’s something to take very seriously,” he said.
Bremo Pharmacy, which has stores on Staples Mill Road and at Henrico Doctors’ Hospital, has been struggling with whether to begin charging for its delivery service, which it has offered for free for the past 27 years, pharmacy manager Michelle Herbert said.
Higher prices could bring more interest in fuel-efficient vehicles, but prices have not been high long enough to draw firm conclusions.
George Hoffer, an economist and transportation expert at Virginia Commonwealth University, reports that the value of compact used cars increased 4.2 percent in the past year compared with 0.9 percent for used sport utility vehicles. “Relatively speaking, SUVs haven’t done as well, but nevertheless they haven’t collapsed” in value, he said.
However, there is a definite softening in the market for big trucks and SUVs and a turn toward smaller SUVs, such as the Toyota Highlander and Honda Pilot, Hoffer said. The trend may be attributed partly to gasoline prices but probably more so to a change in consumer tastes favoring the smaller SUVs, which drive more like a car, he said.
David Claeys, a vehicle appraiser for CarMax Inc. in Richmond, confirmed that interest in smaller SUVs has picked up in the past couple of years but said SUVs in general continue to sell well.
“People may be getting used to these [gasoline] prices,” he said.
The prices have brought record profits to the big oil companies. Exxon earned $25.33 billion last year and in February surpassed General Electric Co. to become the largest U.S. corporation by stock market value.
However, things have not been so rosy for smaller companies that sell fuel to consumers. The profit margin for a local retailer averages about 8 cents a gallon today, said Mike O’Connor, president of the Virginia Petroleum, Convenience and Grocery Association.
Bruce Keeney, executive vice president of the Virginia Gasoline Marketers Council, said the 800 independent stores he represents have seen their credit-card processing fees rise along with the price of gasoline. Fees are based on a percentage of sales.
The increased fees have some dealers thinking about reviving the old idea of discounts for cash purchases, which could provide motorists with a savings and dealers with more profit, Keeney said.
On the positive side, dealers have not seen any increase in motorists driving away from the pump without paying, as would be expected with higher gasoline prices, he said.
Any ideas? Staff writer Greg Edwards can be reached at (804) 649-6390 or [email protected]