Small businesses absorb gas costs, hope prices come down quickly - Ahwatukee Foothills News: Community Focus

Small businesses absorb gas costs, hope prices come down quickly

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Posted: Saturday, March 10, 2012 10:00 am | Updated: 6:17 pm, Sun Mar 25, 2012.

Just the thought that oil prices may go up could be one reason they are, according to one Arizona State University professor.

But it doesn’t make the price at the pump any less real.

Last week, drivers saw the biggest week-over-week increase in four years, according to AAA Arizona, as the average price of gas in Arizona jumped nearly 18 cents to $3.760. Though there was a slowdown over the weekend, prices continued to rise, with the latest AAA Arizona report showing the statewide average at $3.814.

Tim James, research professor of the W. P. Carey School of Business at Arizona State University, said speculators are largely driving up the price of oil, purchasing it with hopes that prices will rise so they can then sell it for a profit. Combined with the increasing demand for fuel, along with recent tensions in the Middle East and the fact that oil is becoming more difficult to extract, James said he doesn’t expect a slowdown anytime soon.

“From what’s going on very recently, there’s been a lot of volatility of oil prices,” James said Tuesday. “The cost of a barrel of oil has been increasing quickly because there is a lot of speculation. A lot of people are buying oil without really needing it themselves, but because they can trade ... then that raises the price when oil gets sent to the refinery and made into gasoline.”

When gas prices go up, everything goes up because products must be transported to the consumers, James added.

“Studies show that when oil prices rise, the speed at which it gets passed to consumers is quite quick,” he said, noting it’s much slower when there is a decline.

Some local small business owners said they’ve been absorbing the cost of fuel — so far — because it’s been so uncertain. But they say that may not always be the case.

Linda Stanfield, owner of Chandler-based Benjamin Franklin Plumbing, said the plumbers she sends out still bring their big vans to be prepared for whatever situation a consumer needs fixed.

“For our type of business, we can’t pick and choose if someone has a sewer need, a water heater need. We have to be prepared with everything and we have to come out with the big trucks,” she said. “The big trucks are like bringing the restaurant to you. We can’t just choose, because gas is going up, to get into smaller vehicles.”

A few years ago, Stanfield said, when prices went up they also came back down quickly.

Stanfield said she’s had to watch her company’s purchases and make financial changes in other areas to keep prices low for costumers.

“I’ll keep an eye on it. We have other costs that come up all the time. Copper goes up and down. We can’t change our prices just because of that. We have to manage our company. Payroll taxes change all the time. Gas is big news ... but people need to understand business has changed in many, many ways. Gas is just one small piece.”

Jeff Lowy has spent 32 years running Encore Creative, an event organization company based out of Tempe. Encore Creative provides everything from flowers and linens to props, staging and sound equipment. The business makes linens and floral arrangements in-house.

From his company’s 50,000-square-foot storage facility, Lowy sends truckloads of party props to all parts of the Valley.

It makes for a lot of trips to the gas stations, too. But so far, Lowy said he has been able to maintain a flat delivery fee for everyone.

“The challenge for us is the cost of fuel. We charge delivery and installation fees,” he said. “Up until now we’ve been able to contain costs for customers to be competitive. Right now, we’re absorbing (the cost). We have been absorbing. ... How long we can continue to do that remains to be seen.”

Last time diesel fuel jumped over $4 a gallon, Lowy said he had to add a “mild surcharge.” But he doesn’t like to do that because he wants to keep his loyal customers.

“We have people, companies and individuals who are on a tight budget. We’re just now coming out of the recession and things are starting to look rosier again,” Lowy said. “We try to hold the line and we absorb as much of that additional cost as much as we can for as long as we can.”

Kristy Jozwiak, director of communications and public affairs for Chandler-based Bashas’ grocery stores, said her company is always looking to keep fuel consumption low, even when prices aren’t escalated.

“Our trucks take direct routes (using the least amount of mileage) from our distribution center in Chandler to deliver food to our stores. We also make a point to source local foods and products for our stores — this includes everything from meat and produce to eggs and milk,” she wrote in an email.

“We maximize the delivery trip that each truck takes. For example, after a truck delivers food to a store, it picks up cardboard, plastic and shrink wrap from the store to go back to our distribution center to be recycled.”

But the company also keeps working to lower the costs, she added.

“We’ve tested a number of ideas to save fuel on our trucks, and are always looking for ways to save on fuel so that we can continue to pass those savings on to our customers.”

• Contact writer: (480) 898-6549 or mreese@evtrib.com

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