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Rising fuel costs eating into S. Florida consumers, businesses

By ANTONIO FINS Business Writer

April 27, 2001

Energy costs continue rising and zapping South Florida consumers and businesses in myriad ways.

Commuters are doling out more of their paychecks to get to work. Tourists arriving at beaches have less to spend on a good time at restaurants and sightseeing. Merchants get hit twice -- sales drop while electric bills go up. Companies that truck, ferry and air-deliver goods see their costs rise, while competition prevents some from passing the added expenses to their clients.

"It certainly can't be a plus for Florida. It has to be a negative," said economist John Robertson at the Federal Reserve Bank of Atlanta. "Last year you had a tripling in gas prices, but because the economy was so strong they canceled each other out. Now the persistently high prices and the slower economy are reinforcing each other."

Today, the average price for a gallon of gas in South Florida is $1.61 for regular unleaded to $1.77 for premium unleaded, up about 12 percent in the past month. In addition, Florida Power & Light Co. recently began billing customers $500 million to cover higher fuel costs, which added $7.43 a month to the average residential bill.

Energy analysts say the increase in crude oil prices started the spiral last year. But another factor, the lack of new refineries in the United States, is not helping. While gasoline demand in this country jumped 22 percent since 1986, refining capacity rose only 7 percent, according to industry figures.

Consumers and businesses are not going to get much help from foreign oil producers. The Organization of Petroleum Exporting Countries has signaled a reluctance to raise production and thus reduce prices, at its next meeting.

Already, fuel prices have taken a toll on more than one company and more than one industry in South Florida.

Landscaping companies, already hurt by water restrictions, say they are getting socked again with gasoline price increases.

Jim Burgess, manager of All Terrain Landscaping in Oakland Park, said fuel costs for his six trucks and two cars are up 15 percent over the last two months. "Our salesmen are spending $35 for gas every day and a half," he said. "Gas is beating us to death. It's hitting us on the bottom line."

At Ridgeway Plumbing in Boynton Beach, owner Gary Kozan said he is afraid to find out how much more it is costing him to gas up the fleet of trucks he shuttles between construction sites in Broward and Palm Beach counties. "I have 100 vehicles running about 90,000 miles a month," he said.

Still, the stiff competition for business, Kozan said, will bar him from passing on higher gas prices to the customer. "It's just another one of those things you have to absorb," he said.

Higher airline fuel costs have hurt the aviation supply and repair business.

Miramar-based Aviation Sales Co. laid off 400 people in April and, this week, cut salaries for most of it 3,400 employees worldwide. And Avteam Inc., also in Miramar, filed for Chapter 11 reorganization in federal bankruptcy court in March.

The two companies say their woes are partly due to adjustments by airlines, which have turned to newer, more fuel-efficient planes to mitigate higher fuel costs. Those aircraft require less maintenance and parts replacement.

For most traditional stores and shops, higher gas prices simply hurt business.

"Consumers have less disposable income, and this is likely to cut down on traffic to malls. It makes it a more expensive outing," said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J. "And retailers themselves have suffered from the higher cost of all different sources of energy."

The repercussions also will be felt in the coffers of Florida's government. As folks buy less, sales tax receipts fall, meaning the state has less to spend.

Mark Vitner, an economist at First Union Capital Markets, said forecasters predict 3.7 percent economic growth in Florida this year. "But we didn't anticipate the sharp run-up in gas prices over the past couple of weeks," he said. Vitner said that if those increases hold up -- or continue -- they could shave as much as half a percentage point from the estimate -- and a gas crunch could drop growth by as much as 1 percent.

Still, the effect of the energy price increases is less pronounced in Florida's two biggest industries -- tourism and trade.

Those in the hospitality sector say say that while half the tourists who come to South Florida in the summer and fall travel by car, most are traveling only from other parts of the state.

Higher petroleum prices amount to a wash of sorts in international trade.

Oil and gas exporting nations, such as Mexico, Venezuela, Ecuador and Trinidad and Tobago, will have extra money to spend on goods and services from Florida. But countries that import oil and gas end up with less income to import other goods.

"It's a double-edged sword for Florida trade with our key partners in Latin America and the Caribbean," said Manny Mencia, vice president for international trade at Enterprise Florida, the state's development group.

"On balance, moderately high fuel prices are generally good for the region and indirectly for Florida trade. But if gas goes to $3 a gallon, then you'll have a drag on the U.S. economy, which is not good for anyone."

Business Writers Joseph Mann, Marcia Heroux Pounds, Barbara Powell, Doreen Hemlock and Tom Stieghorst contributed to this report.

Antonio Fins can be reached at afins@sun-sentinel.com or 954-356-4669.

Copyright © 2001, South Florida Sun-Sentinel

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-- Martin Thompson (mthom1927@aol.com), April 28, 2001

Answers

Well if theres a Hurricane and and people raise there prices because of shortages or demand they call it price fixing & the Fl States Atourney gets involved. It seems now that its ok for the energy industry to raise their prices to meet future price increases while there costs are still at a lower thus GOUGING the public. The politicans in the late 70s kept saying that Europe was paying $3 per gallon so we had cheap energy in comparision. This isn't Europe, but it seems that the politicans & big oil are getting there way. Seeing that gas is needed in the US, it should be the US Policy to keep it as cheap as possible; even if Big Oil is in the White House. But then again, the people don't want industry in Fl or at least the politicans don't so I guess we'll just use our Tax dollars to build unneeded Ball Stadiums and bring in tourists and water on horse drawn wagons. Price fixing & Gouging is the same nation wide no matter how yyou spell it ! Wake UP People . just my 2¢

-- awdragon (awdragon@yahoo.com), April 28, 2001.

As long as the public believes the disinformation thats being put out by the government nothing will change. Government at the Federal, State, County and City levels ALL have windfalls from higher gas prices in the form of extra taxes! So the price fixing & gouging is nation wide now that they are basing prices on the Futures Market; instead of what the Acutal cost are. Thats why not only are the oil companies are recording record profits so are the tax receipts.

Sorry for the typos - new keyboard.

-- awdragon (awdragon@yahoo.com), April 28, 2001.

Isn't it strange that we dummies that travel these forums of information have known that gas prices would go up....along with power and natural gas. But the paid consultants with the sharp pencils still don't get it. Sheesh! Furthermore, the only tourist industry in Fl in summer is local. If you have a Fl drivers license, and especially if you are a Senior citizen, you can get a seasons pass for the price of one day's admission during the summer. If a business doesn't make it in the winter months here....it ain't goin to maker it, period!

-- Taz (Tassie123@aol.com), April 28, 2001.