Gas prices fuel auxiliary consumer costs

Andrew Edwards

Paying for gas these days can be hard enough, but consumers may soon

face the prospect of businesses passing fuel costs on to them.

“I can promise you that prices are going to have to go up, or

people aren’t going to be making a living,” said Jack B. ReVelle, a

management counselor with the Orange County chapter of the Service

Corps of Retired Executives, or SCORE.

SCORE is a volunteer organization that offers advice to business

owners. ReVelle said many entrepreneurs he has talked to are “biting

the bullet,” hoping to ride out high fuel costs without raising

prices. But if fuel prices continue to stay high, companies will be

forced to charge higher prices.

And local gasoline prices are high. Friday, the Chevron station at

Bristol Street and Irvine Avenue posted a $2.63 price for regular

gas. Other samplings of gas prices included a $2.52 charge at the

Shell station at Jamboree and San Joaquin Hills roads and a $2.49

price at the Mobil station at Harbor Boulevard and Baker Street.

But for freight companies, diesel prices are even worse. Tay

Irvine, owner of Mesa Trucking in Costa Mesa, is a businessman who

already has been forced to raise prices to account for fuel costs.

Irvine said he has paid as much as $2.49 per gallon for diesel

fuel. That price translates into a $1,000 monthly bill for each of

his four trucks.

His solution to the bills? Let fuel costs trickle down to his

customers.

“We have to pass it on, and the customer has to eat it, and they

don’t like it. And I don’t blame them,” Irvine said.

At Moonlite Marine, a Costa Mesa sailing supplies manufacturer,

increased distribution costs have led to increased prices.

“We just pass it on to the customer,” general manager Ken Corwin

said.

ReVelle referenced a widely-publicized report principally written

by Goldman Sachs analyst Arjun Murti that forecast a possible “super

spike” in oil prices. The report predicted crude oil prices could

climb as high as $105 per barrel in 2007, before falling to $30 in

2010. According to the report, extremely high prices would decrease

demand for fuel.

“Only a sharp sustained increase in energy commodity prices will

meaningfully reduce energy consumption,” the report stated.

Light, sweet crude oil prices closed at $57.27 per barrel Friday

on the New York Mercantile Exchange. The price was called a record on

the financial wires.

Effects on local car dealers

The Costa Mesa-based Orange County Automobile Dealers Assn.

reported in March that fewer full-size SUVs were sold across Orange

County in January than during the same month last year. Sales of

minivans, mid-size SUVs and full-size pickup trucks also dropped.

However, sales declines were not universal among large vehicle

classes. Sales climbed for luxury SUVs, compact SUVs and luxury cars.

At Fletcher Jones Motorcars in Newport Beach, general manager

Garth Blumenthal said his business has been aided by customers

trading in large SUVs for more fuel-efficient models. However, other

local dealers said gas prices have not substantially changed buying

trends.

“To this point, gas hasn’t been this major impact, but we have

noticed it’s one more roadblock, one more thing the customer has to

think about,” said Jon Gray, president of Orange Coast

Jeep/Chrysler/Dodge.

Large gas-powered SUVs are still selling, said Jim Robins of

Theodore Robins Ford, but the gas/electric hybrid Ford Escape SUV is

also popular.

“We’re selling every hybrid that we can get,” Robins said.

A similar trend has been seen at South Coast Toyota, where general

manager Paul Lunsford said waiting lists for the gas/electric Prius

are so long that he has stopped accepting deposits for the vehicles.

“The minute anyone figures out that you have them, you can’t keep

them in stock,” Lunsford said.