Friday, September 09, 2005
Rising fuel prices have ripple effect on Southwest Virginia economy
On a continuum of human hardship, paying an extra buck for a pizza delivery would register a country kilometer from the grieving spawned by Hurricane Katrina.
But as business and household costs climb in response to rising gas and diesel prices and other ripple effects from Katrina, the financial pain seems destined to increase and spread - at least for the short term.
Those fortunate households in the Roanoke region with disposable income could find there's less money for fun and nonessential shopping. And those who barely make ends meet could feel real distress.
Truckers proudly assert that everything moves by truck. And independent truckers, in particular, could face tough decisions - to absorb the burden of rising diesel costs, to attempt to pass along their spike in expenses in a fuel surcharge or to quit the business.
"The trucker out there is the backbone of the country and he is getting tattooed," said Larry Daniel, president of America's Independent Truckers' Association.
Truckers first. Businesses second. Consumers third. Prepare to be needled and inked.
How these owner-operators and the big-boy motor carrier companies with more clout decide to transfer their costs or cut their losses will affect regional businesses and the customers they serve.
Businesses like U.S. Foodservice in Salem, which trucks in foodstuffs from manufacturers and distributes them via its fleet to independent restaurants, hospitals and other customers.
Businesses like Roanoke Electric Steel, which announced Sept. 2 a 5 percent increase in a fuel surcharge it charges customers.
Joe Crawford, president and chief operating officer for Roanoke Electric Steel, said Thursday the surcharge passes to customers increased charges from trucks moving the company's products.
Frank Pruette, president of the Roanoke/Salem division of U.S. Foodservice, said the division consumes about 20,000 gallons of diesel fuel a week in about 85 tractor-trailers. And the company receives foodstuffs from far-flung places - french fries from Idaho and Washington state, for example. A $1 increase in the cost of diesel fuel has a big impact, Pruette said.
But he said the recent spike in diesel prices happened so quickly that the full effects are not yet clear.
Pruette worries that consumers with budgets pinched by increased energy costs might trim entertainment expenses, a response that could hurt U.S. Foodservice's largest group of customers - restaurants.
But folks who order in or cook at home probably won't be spared. Pruette anticipates food retailers will raise prices. And at least two pizza shops in the Roanoke Valley have reacted to increased fuel costs.
For the first time in East of Chicago Pizza's seven-year history, the Salem shop is charging for pizza deliveries. Owner Rob Shoup added the charge last week.
Delivery to Salem locations and homes costs $1, and the charge rises for more far-flung places.
Shoup said he's also noticed lately that sales have been down at his shop.
"Everyone's affected by it [the cost of gasoline] right now," Shoup said. "It's a trickle-down effect."
Staff writers Jenny Kincaid,
Ray Reed and Jay Conley
contributed to this report.
Surprisingly, he said, the high pump costs haven't sliced pizza delivery tips.
"People are pretty appreciative of getting delivery," Shoup said.
Domino's Pizza on Elm Avenue in Roanoke has added a $1.50 charge to deliveries because of gas prices and other impacts of Hurricane Katrina, according to the shop's answering machine.
Meanwhile, as gas prices climbed, consumers targeted specialized purchases.
Gasoline cans and locking gas caps were nowhere to be found last week at the Wal-Mart on Main Street in Salem. Manager Frank Hubbard said the store sold out of both the cans and caps last week.
"There was no warning that this was going to happen, so I didn't order enough," he said.
Hubbard said the items now are back on store shelves.
For now, taking a Yellow Cab to Wal-Mart or another destination won't cost more than usual. City council adjusts the company's fares, said Steve Roberts, co-owner with his brother, Bill, of Yellow Cab Services and Roanoke Airport Transportation Services. And council approved a fare increase not too many months ago, he said.
The company's cabbies are independent contractors who buy the gas for their hacks. They're absorbing the extra expense, Roberts said.
Some cities in Virginia have recently approved fuel surcharges for taxi companies, but Roberts said it's too soon to tell whether Yellow Cab might pursue a similar measure.
"I think it's something we are going to have to monitor over the next two weeks to two months," said Bill Roberts.
And companies, and schools, in the Roanoke region are monitoring gas prices to decide whether to adjust schedules, organize car pools, increase mileage reimbursement rates for workers or reduce employee travel.
Dave Kjolhede, executive director for the Roanoke Valley Convention & Visitors Bureau, said gas prices clearly affected attendance this week at a meeting in Roanoke of the Blue Ridge Parkway Association. Nearly half the people expected for the opening dinner decided not to travel to Roanoke to participate, he said.
Kjolhede said the Roanoke region actually can benefit when travelers, particularly from Northern Virginia, decide to visit places close to home.
As economists worry about Katrina-related inflation and slowed growth, speculation ranges far and wide about long-term effects, both good and bad, on area businesses.
Crawford said some steel industry observers predict the rebuilding of the Gulf Coast will increase demand for steel products. And, ironically, for mini-mills like the one operated by Roanoke Electric Steel, Katrina's destruction might yield a bountiful supply of a key raw material - scrap metal.





