Gas costs not deterring drivers
By Brad Foss
Associated Press
WASHINGTON — Gasoline prices have surged more than 10 percent in the past month to $2.11 a gallon nationwide, the government said yesterday — 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 yesterday at $56.62 a barrel on the New York Mercantile Exchange.
The average retail price of unleaded regular gasoline rose 5.3 cents last week and is up 21 percent from a year ago, the Energy Department said yesterday.
In Hawai'i, the average price yesterday for a gallon of regular unleaded gasoline was $2.44, one cent shy of the record of $2.45 per gallon reached last week, according to AAA's Daily Fuel Gauge Report.
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 the inflation-adjusted high set in 1980.
The main problem for airlines such as Delta Air Lines Inc. and AMR Corp.'s American Airlines is that — despite growing demand — they have been unable to raise fares to profitable levels because of intense competition from carriers with much lower operating costs, such as Southwest Airlines Inc. and JetBlue Airways Corp.
Even though jet fuel prices are up 65 percent from a year ago at $1.59 a gallon, the average one-way price on leisure fares in the 100 busiest routes nationwide is about 14 percent lower than a year ago, according to Harrell Associates in New York.
And the latest fare increases from the industry — major carriers have raised ticket prices twice in recent weeks — are not expected to dramatically improve the condition for the industry, which Wall Street analysts predict could lose as much as $5 billion in 2005.
The package-delivery industry does not appear to be having the same problem.
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, according to spokesman Norman Black.
For air deliveries, the per-delivery surcharge is 9.5 percent, up from 6.5 percent a year ago.
Black said things could change if economic growth were to slow, but so far UPS remains comfortable with forecasts that call for U.S. gross domestic product to grow by 3 percent to 4 percent in 2005.
