Op/Ed,

Relentless Drive For Oil Company Profits Threatens Overall Economy

The higher oil prices are a threat to America's overall economy and the skyrocketing costs of heating public facilities and keeping school buses, police cars, emergency vehicles and snowplows running are wreaking havoc on local governments all across the country.

For example, in Charlotte, SC, each one cent increase in a gallon of gas means a $70,000 increase in annual fuel costs to the city budget, according to a report distributed at the League of Municipalities Conference, on October 17, 2005.

According to district administrator, Lois Cuff, the small school district of Freedom Wisconsin, came up $100,00 short for heating bills in 2005.  The district budgeted $135,00 to heat the school buildings but the actual bill topped $233,000.
 
To help cover the increase in heating costs, Freedom was forced to pull $87,000 from accounts that supply funding for equipment, athletic uniforms, copy paper, staff travel, student field trips and upgrades in technology. 
 
“Buildings must be kept at a reasonable temperature,” Cuff said. “These are costs that are out of our hands in many ways.”

Local governments are scrambling to find ways to cut costs. In Rhea County, Tennessee this week, about 3,800 school children got 2 days off of school to save money on transportation expenses.

Brad Harris, Finance Director for Rhea County said schools spent $14,000 on fuel in March 2006, compared to $7,800 in March 2005, and that year to-date-spending was up from $68,000 to $102,500.

Buildings must be kept at a reasonable temperature, these are costs that are out of our hands in many ways.
Lois Cuff district administrator,

The nation's small businesses that depend on deliveries are feeling the squeeze. Businesses like floral shops, pizza parlors, taxi drivers are finding it hard to make ends meets.

On March 29, 2006, the city of Seattle, Washington authorized a fuel surcharge of 50 cents per trip for taxicab trips originating in Seattle. The surcharge will also be added to the $28 flat rate charged for the trip to the airport from downtown Seattle. 

In Lafayette Indiana, since September 27, 2005, Star Taxi & Courier, has had a temporary surcharge of $1 in effect. In March 2006, the city moved to discontinue the surcharge and increase the flat fee from $2.50 to $3.50 since gas prices had not decreased since September.

Fernando Mateo, spokesman for New York State Federation of Taxi Drivers, wants to charge passengers a $1.50 surcharge to help with the cost of gas now, and if the price hits $4 a gallon, the taxi drivers wants a $2 dollar surcharge. 

On February 14, 2006, Montgomery County, Maryland made permanent a $1.50 per trip increase for cab rides in effect since September 2005, to provides relief to cab drivers.

Late last year, Business Know-How, interviewed a number of small business owners to see how they were affected by rising gas costs.

At Royal Pizza in Centereach, New York, the manager said the rising cost of gas has seriously affected the business: "Rising oil prices have affected not only our delivery costs;" she told Business Know-How, "but it has also affected just about all our costs: cheese, flour, boxes, soda. The distributors are charging us more because their costs are higher as a result of rising oil prices."

in Charlotte, SC, each one cent increase in a gallon of gas means a $70,000 increase in annual fuel costs to the city budget, according to a report distributed at the League of Municipalities Conference, on October 17, 2005.

Jack Wright, owner of Wright-Way Moving and Storage, in Seattle told Business Know-How, that pennies count. "When you're using 8000 to 10,000 gallons of fuel per month," he explained, "five cents less per gallon can mean a savings of $500." 

Fuel prices are at the top of the list of concerns for members of the trucking industry. "Fuel is our second-largest expenditure following labor costs," Tim Lynch, a senior vice president of the American Trucking Associations told reporters on April 24, 2006.

"Fuel expenditures are roughly 20 to 25 percent of total expenditures for a typical trucking company," he said.

ATA predicts the industry will spend $94.3 billion on fuel this year, based on current fuel price forecasts, a $6.6 billion increase over the $87.7 billion spent by trucking in 2005.

Spiraling fuel prices threaten to spoil what many had hoped would be a recovery year for the airline industry.  The record-high cost of commercial jet fuel is the primary reason why the industry is expected to post an estimated $10 billion net loss for 2005

The average cost of a gallon of jet fuel has more than doubled since 2000 - from 78 cents-per-gallon in January 2000 to $1.81 per-gallon in January 2006, according to the Energy Information Administration, US Department of Energy.

The Air Transport Association expects jet fuel costs to average $70 per barrel or  $1.67 per gallon in 2006, a 90% increase since 2001. 

According to the ATA, at a usage rate of 19.5 billion gallons of fuel a year, each penny increase in price per gallon adds $195 million in annual costs for the airline industry

Rising costs caused airlines to raise fares 12 times in 2005. Last month, American Airline raised domestic round-trip ticket prices by $10, and in the first quarter of 2006, both Continental and Southwest reported a 5.4% increase in ticket prices, increases that fell short of rising fuel prices, according to Airwise News on April 21, 2006.

Farmers face an increasing cost-price squeeze in 2006, according to economists from the University of Missouri-Columbia.  Production costs that increased $28 billion in the past 3 years will increase another $7 billion in 2006, the economists predict. Rising energy prices, including fuel and fertilizer, made up $10 billion of the increase since 2002, they said.

In 2005, farmers spent $3 billion more on fuel and $1.4 billion more on fertilizer than they did in 2004. Natural gas which is 90% of the cost of nitrogen fertilizer is one reason and diesel which has commanded a large per-gallon premium over regular gasoline is another, according to Agriculture Secretary Mike Johanns remarks to The Second Annual National Agricultural and Forestry Renewable Energy Summit Washington DC on March 8, 2006 

In 2002, farmers spent $18.36 billion on energy for crop production. Increasing prices raised those costs to approximately $46.4 billion in 2004. Price increases of 20% or more on essential items like fertilizer, fuel, and pesticides have made it very difficult for farmers to get by, according to the Congressional Research Service, on November 19, 2004.