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High gas prices squeezing consumers, businesses

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Posted: Sunday, November 18, 2007 12:00 pm | Updated: 4:55 pm, Wed Aug 15, 2012.

By Don Bolding

Killeen Daily Herald

Motor fuel prices keep escalating, now hovering around $3 a gallon, and the bad news is that nobody is predicting any relief in the foreseeable future.

The U.S. Energy Information Administration says the headaches are due to increasing demand for oil in global markets, and the demand for fossil fuels is growing much faster in the developing world than in North America, but U.S. petroleum consumption is expected to show an increase of 0.5 percent by the end of the year and 1 percent in 2008.

The Organization of Petroleum Exporting Countries has committed to increasing oil output beginning this month, but the market still faces a limited surplus production capacity, falling inventories and political unrest at many points of production and shipment. In Nigeria, rebels have been deliberately attacking production facilities.

Oil prices have a great deal to do with what OPEC says, but if they don't drop significantly soon, the Oil Price Information Service expects gasoline prices to go up another 10 to 15 cents a gallon in the next few weeks. The American Automobile Association said prices may set a new record.

But cars, trucks and airplanes keep moving. Some say that's part of the problem. First Texas Bank president Patton Kaufman said a friend of his said, "I wish gasoline prices would hit $10 a gallon. Then we might do something about it."

Short of a national strike, though, there's little that average people can do about it but keep working and worrying, and that's what they do. Greater Killeen Chamber of Commerce president John Crutchfield expressed irritation that people fall prey to "wild reports" that gas prices will reach $4 a gallon by the end of the year.

"That's ridiculous," he said. "And people can put out a little effort and see why." He said the National Petroleum Institute, AAA and the American Association of Retired Persons all put out fact-based predictions, usually available on their Web sites.

But he said the threshold of $3 a gallon does seem to be a subconscious magic number that alters behavior every time it's reached. It stops people from making purchases, and that could be damaging as we enter the most active retail season of the year.

He said he thought the "magic number" might have played a part in lackluster autumn sales figures reflected in the state comptroller's sales tax rebate reports this month.

Killeen's and Copperas Cove's figures both were less than numbers in November last year, and the whole state showed a slump, although the state comptroller's office said figures for the same period last year were unusually high.

"The country hasn't had a healthy, market-based debate about energy," he said. "Congress won't let us explore our reserves, and we put ourselves at the mercy of foreign producers." He said alternative fuels such as ethanol hold some promise, but they require a great deal of subsidy.

Kaufman also notices something magic about the $3-a-gallon threshold.

When gas prices get hot, so do the checks.

"Whenever gasoline passes that mark, we see a sharp rise in checks returned for insufficient funds," he said. He worries that continued high energy prices could aggravate inflation.

"The government has lowered the discount rate to try to deal with the the real estate debacle," foreclosures due to subprime mortgages. But that solution could go up in smoke if all prices start skyrocketing.

Locally, we can't do much to help.

"Our town is not New York, where we can build subways and other mass transportation," he said. "We have to use gasoline and deal with the consequences."

Don Farek of Cameo Homes said fuel prices are affecting some people's qualification to buy residences.

"First we had tightened credit because easy loans were resulting in so many foreclosures," he said. That hasn't been much of a problem here because soldiers and others have steady incomes, but it was having some effect, he said.

"Then fuel costs started driving up the cost of construction so that many people who could have qualified have been priced out of the market.

"Lumber yards and everyone else who delivers to job sites have to pass increased costs along," he said. "More suppliers may start adding fuel surcharges. Our own fuel costs have increased about 250 percent. And it's not just motor fuel. Oil goes into making asphalt, and some people are talking about going to concrete driveways because the price is competitive now.

"It's going to trickle down to utility bills, and it's another reason energy-efficient homes are becoming more important," he said. Cameo already focuses on building Energy Star homes.

Randy Sutton, president of First State Bank in Harker Heights, said he is hearing of more fuel surcharges. He said prices are definitely affecting consumers, "who are having to rebudget just to live their lives. But business doesn't seem to have slowed much."

The local manager of a long-haul moving company who didn't want his firm identified without corporate permission said he is having to pick and choose the most lucrative jobs instead of accepting marginal work, and business is down about 20 percent because of it.

Still, he said, transport and storage rates around Fort Hood are good compared with other areas because movers here are adept at formulating rates for military customers. He said that if current conditions persist, he expects the crunch to get worse in the summer when more people want to move.

Also in the summer, the government mandates more expensive fuel mixes to protect the environment, and fuel demand in general increases, driving prices up even in the best of times.

Ed Schieber of Big Ed's Handyman Service in Killeen said he has started charging a flat minimum rate for all service calls instead of pro-rating it for more distant locations.

"It hasn't hurt business, because we provide services people have to have," he said. "But it hits them in the face, and I hate having to do it. I bought a new truck trying to improve mileage, but it hasn't helped."

He said some bigger companies that do remodeling and other major work and have to use trailers have spiked their prices even more, "but they may make three or four calls a week. I make three or four a day. And the charge for the work is more, too, because materials have gone up. The price of a 2-by-4 is 50 percent more than it was a short time ago, and the quality is poorer."

Officials of American Airlines in Fort Worth, which owns American Eagle at Killeen-Fort Hood Regional Airport, said the company increased prices $10 for all one-way tickets and $20 for round trips at the first of November, but Killeen's assistant aviation director Jim Livingston said he has seen little if any decrease in flights or passengers boarding them for any of the three airlines operating locally.

"There was a little slump in September, but there always is during that month," he said.

People gassing their cars at the pump typically say they aren't cutting back on their driving. Most say work and family demands prevent them from cutting down much, and some people fueling vehicles for recreational purposes say they're not going to let current conditions interfere with their lives.

So business in this area is continuing as usual. The main difference is that people's dispositions are a little more grim, and the universal struggle for affordable energy might be attended by a maturing process.

"Gas prices in Europe a few years ago reached $3 and $4 a gallon when they were still under $2 here, and they were making it okay," Farek said. "Cheap gasoline is one way Americans have been spoiled for so long in so many ways."

Contact Don Bolding at dbolding@kdhnews.com or call (254) 501-7557.

The Associated Press contributed to this report.

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