Consumer prices rose last month as the cost of gas increased by the largest amount since June 2009. The Labor Department said Friday the Consumer Price Index rose 0.5 percent in December, the largest increase in 18 months. About 80 percent of the increase was due to an 8.5 percent rise in the gasoline index, also the sharpest increase in 18 months.
According to AAA Auto Club South, the average price for a gallon of regular unleaded gasoline in the state of Georgia last week was $3.01, up sharply from $2.67 at the same time last year.
With industry experts predicting a continued slow and steady increase in the price of gasoline, local business owners and gas distributors are worried about the impact that increased fuel costs are going to have on the local economy and their businesses.
"All of our clients are really, really concerned about the price of gasoline and diesel fuel," said Brad David, president of the McDougald Oil Company in Statesboro. "From our agricultural clients to industrial and those with commercial fleets, everyone is feeling the impact of higher fuel costs. A lot of the uneasiness is due to the unknown. We are hearing predictions of $4 per gallon perhaps this summer, but the reality is that no one really knows. It is a global commodity with market forces beyond our borders."
David said he receives calls from his customers on a daily basis regarding the price movement of gas and diesel fuel.
"We receive notification twice a day from our suppliers, and can update our prices accordingly," he said. "But, in reality, no one really knows what the price is going to do, so it is extremely difficult for farmers, those placing construction bids, or any business owner for that matter to budget for their fuel costs at this point."
Local building contractor Jamey Cartee said increased fuel costs impact every aspect of his business.
"First of all, just everyday driving that you have to do as a builder becomes much more expensive," he said. "Then you have the cost of building supplies that have a petroleum component such as asphalt shingles and PVC pipe, and the shipping of the materials that you need for construction becomes much more expensive. Finally, subcontractors begin to take work that is closer to home, so they won't have to drive as far and incur that extra fuel cost. If you have a job that is out of town, it becomes much more difficult to secure the help that you need."
Cartee said the uncertainty of future costs has a significant impact on construction bidding.
"If you build in for the potential of higher fuel costs, than you very well may lose that bid," he said. "If you don't account for that possibility, you may submit a bid that is way to low and not indicative of the actual costs that you will face at the time of construction. It is really tough to be competitive in such an uncertain environment."
Russell Rosengart, owner of several Sonic Drive-In franchises located in Statesboro and around the state, said increasing fuel costs can have a dramatic effect on his business.
"It is extremely hard for us to pass on to customers fuel surcharges and increased food costs," Rosengart said. "Our customers expect a certain price level, and if we have to charge a lot more to offset the increases that we are seeing, it could have a dramatic, negative impact on our business."
Rosengart believes the cost of food and gasoline are keys to a continued economic recovery.
"If there are significant increases in either, it is my opinion that the small recovery that we are feeling will stall or reverse," he said. "I think it is that critical."
Recent economic indicators support Rosengart's claims. According to the Associated Press, high unemployment and a weak economy are keeping prices in check. Retailers and manufacturers are reluctant, for now, to pass on the rising costs of raw materials to consumers, for fear of scaring them away.
"I am being told that we could see the price of gasoline reach $4 a gallon," David said. "I think that would be disastrous for many small business owners. I really don't want to see it go beyond $3.50, but it isn't in our control. Oil is a commodity that is traded on the open market around the world, and speculators for that commodity drive the sale price/cost. We are at their mercy."
David said many people wrongly assume that his company makes more money if the price of gasoline goes up.
"The higher cost of product is detrimental to our business as well," he said. "Our net revenue actually goes down when the price of gas is high, because people buy fewer gallons of gasoline, so our volume is down."