Thursday, May 20, 2004

High gasoline prices are forcing local businesses into a choice of raising prices or suffering losses.

The average price for a gallon of regular self-serve gasoline hit a record of $2.03 yesterday in the District. Regionally, the average was $1.99, according to auto club AAA Mid-Atlantic.

Motorists are paying about 50 cents more per gallon of gasoline than one year ago and 21 cents more than a month ago. Nationally, the average has hit $2.01, according to the Energy Department.

“Every single one of our delivery people is saying we’re not making any money because all of our money goes for our gas,” said Chris Chisti, manager of Pizza Mart in Northwest Washington.

The company’s delivery workers receive a commission. This week, Pizza Mart is raising prices about $1 for a pizza and 50 cents on other items.

“We have to do that or we’re going to lose all our employees,” Mr. Chisti said.

Philip Lebet, corporate secretary of Diamond Cab Co., said he needs to raise fares again to keep pace with rising gasoline prices, but does not have permission from the D.C. Taxi Cab Commission.

The commission granted cab companies permission to raise fares 10 percent beginning this month, but Mr. Lebet says it is not enough. He said the commission is not considering another increase soon.

“The price of gasoline has eaten up the whole rate increase,” Mr. Lebet said. “Meanwhile, everything else has gone up. Rent has gone up, tires have gone up. All the increase is paying for is the gasoline.”

The company’s 250 cabdrivers are suffering the brunt.

“It’s eating my drivers alive,” Mr. Lebet said.

Crude oil prices have climbed above $40 a barrel, caused by a variety of factors, including growing worldwide demand and violence in the Middle East.

Other factors include production limits by the Organization of Petroleum Exporting Countries, which produces one-third of the world’s oil, and a switch to more environmentally friendly, and expensive, fuel blends for the summer months.

“All these higher prices are clearly a drag on the economy,” said John Felmy, chief economist for the American Petroleum Institute. “They raise our costs of producing goods here and they hurt our competitiveness.”

No new refineries have been built in more than 20 years due to regulatory obstacles and local opposition.

The number of refineries has dropped from more than 450 in the 1930s to 176 larger refineries that are operating at 93 percent of capacity.

A 1-cent increase per gallon means U.S. consumers will spend an extra $1.3 billion a year on gasoline, he said.

Some employers feel they have no alternative but to absorb the costs.

“We cannot get that money back from the customer,” said Jacob Sudai, owner of Prime Movers, a domestic moving company based in Capital Heights.

Two years ago, he paid about $5,000 a week on fuel for his company’s 40 trucks. Now, he is paying $7,000 to $8,000 a week.

“I take a loss,” he said. “If I say pay me for the fuel, you’re going to think I’m scamming you. There’s nothing you can do about it.”

Terminix, a pest-control company, hopes to avoid the controversy it confronted three years ago when it added a $1-a-month fuel surcharge to its fees.

“We had some very mixed reactions from customers,” said Kathi Vassar, office manager for the company’s Clinton branch.

She said high prices are pressuring the company to add another surcharge, but, “Not yet.”

Technicians from the office travel throughout the area in 16 trucks and a car.

Steve Caruso, manager of Caruso Florists in Northwest, said he is trying to figure out ways to eliminate other expenses to make up for high gasoline costs.

“We’re taking a hit on the deliveries, but what can you do?” Mr. Caruso said. “We’re not going to raise prices. We’re tightening our belts. We’ll make cuts somewhere else.”

AAA Mid-Atlantic reports vacationers will face similar tough choices during the upcoming Memorial Day holiday.

Although about 2.6 percent more Americans will travel during the holiday compared with a year ago, they plan to take shorter trips, according to a survey by the auto group.

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