San Diego BusinessSupply Worries Push Gas Prices to Record Highs
In Brief ... Job growth exceeds expectations SAN DIEGO -- Investor fears of insufficient gasolines supplies in the coming summer months have pushed gas prices to record highs for the second week in row. But it's not just at the pump that consumers are feeling the price pinch. The higher cost of fuel is also raising the cost of transportation, which is being passed along to consumers in the form of fuel surcharges and higher prices of basic commodities. The average price of self-serve regular gasoline in the San Diego area at noon today was $2.283, 7.4 cents higher than last week, 4.5 cents above last month, and 41 cents higher than it was a year ago, according to the Automobile Club of Southern California. Utility Consumers' Action Network, which conducted a survey last night, pegged the average cost for a gallon of regular gasoline at $2.32, the highest average in San Diego history. The consumer watchdog has asked the governor to declare a state of emergency. "Analysts say that there is continuing concern by traders that gasoline demand in the summer may outstrip supply," said auto club spokesperson Carol Thorp. "These supply jitters are pushing prices up so much that we are seeing new retail price records daily throughout Southern California and the nation. "Wholesale gasoline prices shot up to $1.70 per gallon last week, dropped for a few days, and now have climbed to $1.70 again," she added. In California, the Central Coast region has the highest priced gas, averaging $2.387 a gallon, an increase of 6.6 cents over last week, according to the auto club. In the Los Angeles-Long Beach area, gas is $2.266 a gallon, 8.2 cents higher than last week, 3.8 cents higher than last month, and up 37 cents from a year ago. By comparison, the national average for gasoline is $1.950, 9.3 cents higher than last week and a new record high. Nearly every major city surveyed reported a record high. The cheapest gas prices reported by the auto club are in President George Bush's home state, where the average price in Dallas is $1.822 a gallon and in Houston it's $1.804 a gallon. Travel costs rising The federal Energy Information Administration raised its forecast for gasoline prices for summer driving season, projecting that regular gasoline prices will average $1.94 a gallon at pumps from April to September. There is a silver lining to this dark cloud, however, according the Automobile Association of America. Lower lodging and meal costs should help vacation travelers compensate for record high gas prices this year, according to AAA’s annual vacation costs survey. Lodging and dining costs should be about 4 percent lower this year than in 2003. The AAA does not expect summer travel to be curtailed because of the higher gas prices. "The summer vacation trip is something Americans are reluctant to give up," AAA spokesman Geoff Sundstrom told Knight Ridder Newspapers. That said, a recent summer travel outlook survey by Roper Reports concluded that Americans may cut their trips short, stay in cheaper hotels or eat in less expensive restaurants. Those traveling by air are likely to see higher costs as well. Most major airlines have announced fuel surcharges to offset the higher cost of fuel. Late last month, American raised its fuel surcharge on tickets from $20 to $30 for most round trips in the United States and Canada. Delta and Continental followed suit. American, the world's largest carrier, said its fuel costs rose 10.8 percent in the first quarter, jumping $79 million to $808 million. The airline paid an average $1.01 a gallon for fuel, up from 94 cents a gallon a year earlier. For every 1-cent a gallon increase in fuel prices, the company's cost goes up by $30 million a quarter, officials said. The trucking industry is also feeling the pinch. Two weeks ago, more than 300 independent truck drivers stopped hauling goods to and from the Port of Oakland, disrupting the flow of goods in protest of stalled contract negotiations. The truckers want a fuel surcharge to cover the rising cost of diesel fuel, among other changes in their contracts. Drag on the economy The higher fuel costs affect everything from the price of milk to going out to dinner, said John Hawkins, chairman of the Greater San Diego Chamber of Commerce and president and CEO of Cloud 9 Shuttle, which primairly serves air travellers. "The cost of gas is a drag on the economy, it's very inflationary," he said. "It all trickles up to the consumer." He pointed out, for example, that several trucking companies have raised their rates by 25 percent to accommodate the higher cost of diesel fuel. Although Cloud 9 has not raised its fares, the cost of gas is near the trigger point, and if the prices remain high, and it appears likely, rates will have to go up 2 to 3 percent, Hawkins said. "It's not a matter of maintaining a profit, it's a matter of survival," he said. The air travel industy is just now getting back to where it was pre-9/11, but rising fuel costs have become a threat to that resurgence. Appeal to the Governator The rising cost of gas prompted UCAN to ask Governor Arnold Schwarzenegger to declare a fuel emergency. In a letter dated May 10, Executive Director Michael Shames recommended several steps the state government could take to provide some relief to consumers. For starters, he urged the suspension of the sale of 89 octane gasoline in the state. Eliminating this grade of gasoline would free up the equivalent of nearly 200 million gallons of storage at terminals and stations around the state, based upon industry observer estimates, Shames wrote. His second recommendation was for the state to deploy California Public Utilities Commission electricity inspectors as "refinery cops" to conduct spot checks on refineries that are undergoing planned or unplanned operation outages and prevent the "economic perversion" of the 2001 electricity crisis. Shames also wants the state to impose a windfall profits tax on oil companies that are "opportunistically gouging" their customers. "UCAN believes that actions must be taken "By taking this action, you will send a message to the public that you are engaged and concerned about the phenomenally high gasoline prices," Shames continued. "And you’ll be sending a message to the oil companies that the state will not tolerate the current gouging of California’s consumers." Related story: Record Gas Prices Have Consumer Advocates Fuming * * * * * In Brief ... Mores jobs: Job growth in San Diego and the state is exceeding economists' expectations, revealed today by surprising numbers released by state officials, said Kelly Cunningham, director of the Economic Research Bureau at the San Diego Regional Chamber of Commerce. In the past 12 months, 13,500 jobs have been added in San Diego, with total employment up by 34,000. The difference between the two figures is that many laid-off workers are now self-employed or working as independent contractors as companies find ways to work around high labor costs associated with employee benefits and workers' compensation, Cunningham explained. Statewide, 90,000 jobs were added over the past 12 months, with total employment up 221,000 to 16.4 million, the highest on record. The construction industry if fueling the job growth, with 8,600 new jobs recorded during the past year. The financial services sector, which includes banking, insurance, credit card companies and real estate added 2,900 jobs, and the services and retail trades sector grew by 2,200 jobs. The health-care sector added 900 jobs. The manufacturing sector, however, continued to decline, losing 1,700 jobs. But it was government employment that took the biggest hit, losing some 3,000 jobs. Within that sector, education lost the most jobs, Cunningham said. "We are doing better than expected, but I want to see the high-tech sector, which is relatively flat, doing better," he said. Leadership award: Irwin Jacobs, chairman and CEO of Qualcomm Inc., was honored with the 2004 Dr. Dorothy I. Height Chairperson's Award of Special Merit by the Leadership Conference on Civil Rights at an awards ceremony last night in Washington, D.C. The LCCR recognized Jacobs for Qualcomm's commitment to diversity in the workplace, his leadership in the education reform movement and the company's support of affirmative action. _____ Larry Edwards is a long-time San Diego business reporter. He also writes the monthly Business Insights column for San Diego Magazine. Have a hot news tip? Contact Larry at: larry@larryedwards.com.
Larry M. Edwards About the author: Larry Edwards is a long-time San Diego business reporter. He also writes the monthly Business Insights column for San Diego Magazine. More by this author Subscribe to Business:
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