A Domino Effect

As we see the price of gasoline reach the $3 a gallon mark we must keep in mind that the steady increase impacts all aspects of our lives. It’s not just the $5 to $10 dollars more that we spend on a fill up but all the other costs that are being passed on from businesses to the consumers.

Did you know that for every one cent increase in fuel, the Air Transport Association estimates an additional cost of $180,000,000 per year in the Airline industry? Who pays for this? Two guesses, you and me. They pass on the costs to the consumers in the form of surcharges. Here are some examples:Qantas says that effective May 5 it will levy an extra $98, each way, on international flights to compensate for rapidly rising fuel prices. And it's not the only airline moving quickly to pass on rising fuel costs to long-haul customers.

Lufthansa last week raised its fuel surcharge on long-haul flights to $76, sister company Swiss airlines boosted its levy to $84, and Irish carrier Air Lingus launched its first surcharge ($43, each way, on flights to and from the USA). The same week, British Airways hiked its surcharge on long-haul flights for the eighth time in two years, to $61 per flight, and a week earlier American Airlines added a $10 long-haul surcharge.

Airlines are being creamed by the latest hike in fuel costs. Airline watcher Terry Trippler of Cheapseats.com says it now costs $103,400 to fill a Boeing 747-400 for a flight to Asia, up from $48,000 two years ago. That works out to $253, one way, for each of the 408 seats — more, he notes, than the $227, not including taxes, he recently paid for a Northwest flight from Detroit to Tokyo.

It doesn’t stop with the airlines – every mode of transportation is feeling the weight of the increasing fuel costs. Cruise lines are getting hit hard, but so far only a handful of small luxury lines have passed the cost on to passengers. Earlier this month, Regent Seven Seas boosted its surcharge on Tahiti cruises from $5 to $12 a person, per day. Crystal has used a $4-a-person daily surcharge since last July.

Who is going to pay for the increased costs for busing our children to school? Do you know that school transportation is mandatory in most states, and buses account for more than 8 billion trips to and from school each year.

In South Carolina, the Education Department buys more than 12 million gallons of diesel fuel each year for its 5,000 buses. Each time the fuel rate goes up a penny, it costs the state about $120,000. At the current rate — the department pays $1.94 a gallon — the agency will bust its budget by $1.4 million and have to ask the governor and lawmakers for help.

Have you thought about what it costs the major delivery companies such as UPS, FEDEX, and the Postal Service? Where UPS and FEDEX and all the rest can readily increase their prices to offset their additional costs, the Postal Service has to wait through a rather lengthy process to raise the price of a stamp. By the time they get approval they are billions in the hole. Since the USPS raised rates in 2002, "fuel has risen more than $1 a gallon, costing the postal service over $1 billion a year for the gasoline we purchase directly," Potter said in his keynote speech at the 2006 National Postal Forum.

In Greenville, Texas, Crew Cut Lawns, a landscaping and lawn care service with $180,000 worth of equipment and four gas-guzzling Suburbans, has raised prices 5 percent and stopped offering free irrigation estimates to outlying callers.

At American Tire Inc. shop in Wheeling, W.Va., Tom Fredericks has doubled his $5 charge for road service calls to fix flat tires. He said he may also have to increase prices for tires, which are made from oil.

Connie's Pizza, a Chicago-based chain that makes about 10 million pies a year, has a fleet of 60 delivery trucks that use a total of $10,000 to $12,000 in gas per week, president Marc Stolfe said.
The company charges a $2 delivery fee. But because of the run-up in gasoline prices, that no longer covers the overhead costs, Stolfe said. So far, he has yet to raise the delivery charge for fear of losing business.

Everyone is starting to feel the bite of the escalating fuel costs. The farmers are getting a double whammy. The U.S. Department of Agriculture said national farm production expenses were up 5 percent in 2005 over 2004, mainly because of higher costs from "purchased inputs" such as fuel and fertilizers. Prices have tripled in three years. I used to buy a head of lettuce for 99 cents just a year ago, now it has doubled in price and going up. Can you blame the farmer?

Just think of all the products such as the tar used for paving purposes and roofing materials that are derived from oil and how much they have increased. These additional costs are being pushed on to the consumer.

Many people on fixed incomes have had to make some tough choices on what to cut out of their budget. Do they stop heating their homes or eating less or going without some of their medications? Some have made choices that have landed them in the hospital.

Some others are coping like the 43-year-old cabbie, who would identify himself only by his first name, Abeye, who has watched the rising gas price knocking $15 to $20 a day from his income, even with a fare increase that took effect early this month.

To make up the loss, he is working harder -- seven days instead of the usual five each week. That's time he used to spend with his kids.

Some people say that we’re lucky not to be paying the prices that Canada and Europe have been paying for years. I agree, but I also think that with all the resources available to us that we should have come up with alternative energy many years ago. If a nation such as Brazil can do it, why can’t we?

Yes, we can blame the politicians and the various administrations since the 70’s on for these problems, but we also must share some of the responsibilities. We haven’t pushed back at them; we’ve sat back and started driving bigger and costlier gas guzzling vehicles because we thought as Americans we were insulated from high fuel and energy costs.

The handwriting has been on the wall since the early sixties.

I wonder what happened to the notion that was held by many who said that the reason we invaded Iraq was for the OIL. It surely appears to have had an adverse effect.