Economy revving despite high gas prices

WASHINGTON — Gasoline prices have surged more than 10 percent in the past month to $2.11 a gallon nationwide, the government said Monday — and the latest run-up in oil futures may lead to even higher pump prices soon.

Still, motorists don’t seem deterred so far: Energy Department figures show that demand for gasoline has risen about 2 percent from a year ago.

In addition, many energy-intensive companies are prospering in spite of soaring fuel costs, thanks to solid economic growth that has allowed them to pass along higher prices to customers.

There are exceptions, however: the U.S. airline industry is still losing millions of dollars every day and small businesses are more likely to absorb the financial hit than risk losing customers by charging them more.

Overall, executives say they are relatively upbeat about business conditions — even with oil prices surging.

Light, sweet crude for April delivery slipped 10 cents from its all-time settlement high, set Friday, to close Monday at $56.62 a barrel on the New York Mercantile Exchange.

“The outlook is pretty good,” said Shane Pliska, business development manager for Planterra Corp., an interior landscaping company that maintains indoor plants for roughly 1,000 companies in the Detroit area. Planterra has seven delivery trucks and 50 or so workers who drive their own vehicles, but get reimbursed for mileage.

The average retail price of unleaded regular gasoline is up 21 percent from a year ago, the Energy Department said Monday. Yet Pliska said business is better today even without asking customers to pay a fuel surcharge.

“We don’t nickel and dime,” Pliska said, noting that profits would of course be better if fuel prices were lower.

Bill Zollars, president and chief executive of trucking company Yellow Roadway Corp., is also optimistic about the outlook for business despite the soaring cost of diesel fuel.

Diesel now averages $2.24 per gallon, or roughly 36 percent more than a year ago, and at the current pace the entire U.S. trucking industry will spend nearly $15 billion more in 2005, according to the American Trucking Associations.

But the industry thrived despite an extra $10 billion in diesel costs in 2004 because of fuel surcharges and strong demand from the retail and manufacturing sectors. For example, earnings at Yellow Roadway, headquartered in Overland Park, Kan., more than quadrupled in 2004 to $184.2 million.

“Most of our customers are just happy to have the demand for their products going up, so paying another 12 percent or so on a fuel surcharge is a lot less of a problem than not being able to sell what you have,” Zollars said.

Zollars said low inflation and low interest rates have also benefited the economy, which has surprised him with its resiliency to the surge in energy costs.

Energy analysts also point out that the United States is much more energy efficient than it was during the global energy shock that followed the Iranian revolution and that oil prices would have to surpass $90 a barrel to match inflation-adjusted high set in 1980. Likewise, gasoline prices would have to climb another $1 per gallon to reach all-time highs.

“What we need to do is keep a very close watch on our other expenses … and hopefully we’ll be able to weather the higher fuel prices,” said Godfrey LeBron, vice president of Paradise Trailways, a charter bus company based in West Hempstead, N.Y. that has raised its prices to cover the higher cost of diesel fuel.

The package-delivery industry also seems little-affected.

United Parcel Service Inc. of Atlanta initiated its first-ever fuel surcharge for ground deliveries earlier this year and, based on current fuel-price trends, the extra 1.75 percent fee could go up in the months ahead.