Often faced with multiple challenges to turn a profit, small businesses can add navigating rising gasoline prices this summer to their list.
The American Automobile Association reported on Monday, April 24, that the national average for regular unleaded gasoline climbed to $2.42, the highest price this year.
That hike was 29 cents higher than during the same time in April 2016.
Why the Increase?
But prices in recent days have dropped due to an oversupply of gasoline and weaker demand for the fuel, says Tamra Johnson, an AAA spokeswoman. As of Thursday, May 4, the average price was around $2.37, about 15 cents higher than a year ago. The latest price was the first decline in about three weeks. Here’s the link to latest release on gas prices.
Johnson suggested that small businesses adjust their budgets to potentially prepare to pay higher prices this summer than they did last summer.
“There has been a dip in price heading into the summer, but we don’t think we’ve seen the peak yet,” Johnson says.
She pointed out several factors that drive up prices. Johnson says those include gasoline stations switching from winter to summer blends, higher demand, and where the price of oil stands.
She says a key decision by leaders of the Organization of the Petroleum Exporting Countries (OPEC) will be a big determining factor on which direction prices might go this summer.
“If OPEC decides at its June meeting to extend their current agreement of production cuts, we could see prices move slightly higher or remain the same,” she says. “If they decide to end the agreement, we will see prices decline.”
The Small Businesses High Gas Prices Can Hurt
Surging gas prices can affect several kinds of businesses. Those can include pizza franchises, florists, moving companies, and online grocers that offer delivery services.
W. Randolph Lee, president & CEO of Raven Transport, No.39 on the BE 100s Industrial Services Companies list with $88.7 million in revenue, knows that as gasoline and diesel fuel prices go up, trucking, airline and other transportation companies are hit hard by the increase.
Lee says the Jacksonville, Florida-based truckload freight company is now paying about $2.59 a gallon for diesel fuel, up 10 to 12 cents a gallon since the beginning of this year. The gain is huge because Lee estimates that about 290 of his company’s trucks that transport consumer products for major companies and small businesses use diesel fuel. Raven’s additional fleet of 208 units are liquid natural gas powered and not dependent on diesel fuel.(Image: photo courtesy of Raven Transport Co. Inc.)
At the same time, Lee is cognizant that he can’t just pass the higher cost onto customers because raising their rates could make his company no longer price competitive with other trucking companies and cause it to potentially risk losing those relationships.
To offset the higher expense, Raven Transport is using strategies to avoid operating trucks running with no freight. Still, Lee says the rising prices are hitting the bottom line.
“If diesel fuel costs continue to rise, that will definitely have an impact on our profitability,” Lee says.
Here are some tips that most small businesses can integrate into their driving strategy this summer to help achieve fuel savings:
Make sure tires are inflated properly
The U.S. Department of Energy says that proper tire inflation can improve fuel economy by up to 3%. Check tire pressures at least once a month, and make sure it’s done correctly. Check the pressures when the tires are cold and have not been driven recently. Tires should be inflated to levels recommended by the vehicle manufacturer, not the pressure levels stamped on the tire sidewall.
Use a light foot on the gas and brake pedals
Instead of making quick starts and sudden stops, let up on the gas and brake pedals. If there is a red light ahead, ease off the gas and coast up to it rather than waiting until the last second to brake. Once the light turns green, gently accelerate rather than making a quick start.
Let AAA find lowest gas prices
AAA’s smartphone app offers motorists with the most current and accurate gas price data available, by drawing on credit card transactions at more than 100,000 stations nationally. Motorists can find the lowest gas prices close to home or on the road. The app’s GPS technology helps users locate stations on a map and see the price for all available grades of gasoline. Visit AAA.com/Mobile.
Drive the speed limit
Slowing down to observe the speed limit is safer and can conserve fuel. The U.S. Department of Energy says that each 5 mph driven over 50 mph is like paying nearly 17 cents per gallon for gas. Leave yourself plenty of time to reach your destination, helping you arrive safely with a little extra fuel in your vehicle.
Plan errands in advance
Try to combine multiple tasks into one trip when running errands. Several short trips starting with a cold engine each time can use twice as much gas as a longer multipurpose trip covering the same distance when the engine is warm.
Reduce the load
A heavier vehicle uses more fuel. Lighten your vehicle by cleaning out the trunk, cargo areas, and passenger compartments. Avoid using a car’s roof rack to transport luggage or other equipment—especially over long distances on the highway.
Make your gas money last longer
Consider that AAA members who pay for gasoline with an AAA Member Rewards Visa® credit card receive double points on gas purchases. Plus, members can get one point for every dollar they spend, triple points on AAA and all travel purchases, and double points on gas, grocery, and drug store purchases. Members can apply for the card at AAA.com/creditcard.
Make vehicle upkeep a priority
Keeping a car running properly helps achieve maximum fuel economy. Follow the vehicle manufacturer’s recommended maintenance schedule. Pay attention to vehicle warning lights because they signal problems that will greatly decrease a car’s fuel efficiency.
For the latest details on gas prices, visit www.gasprices.aaa.com
Source: American Automobile Association
Jeffrey McKinney is a long-time freelance business writer and reporter, contributing to Black Enterprise magazine for several years on a broad range of business and financial topics.