Fuel prices hurt businesses, Yoopers
ESCANABA — When gas prices first began to rise in February, Grant Garvin, senior at Northern Michigan University, began to feel on edge. Garvin began living independently a couple years ago, footing the bill of tuition, rent, and the additional costs that come with flying solo. But, the rise in nationwide monetary pressures are beginning to weigh Garvin down.
On top of managing an Airbnb and holding a front desk job at a local hotel, Garvin recently acquired a third job as a human resources intern to try and ease his financial worries. This effort to get by, however, has led to a “chaotic” work-life balance.
“When the prices began rising, I was not working as much and I had not started my internship yet, so I definitely felt my pockets hurting,” Garvin said. “When gas hit $4 I was nervous. Then it hit $4.59 and I vividly remember thinking that it would go down sooner or later. Now it is $5.19.”
In response to the rising prices, Garvin has adjusted his daily routine and spending habits around the cost of gasoline. Along with creating a budget to ensure he can pay for groceries, rent, and utility bills every month, Garvin has recently opted to ditch his car and travel by foot when able.
“I started to think more strategically about where I was going and if I could make all my necessary stops in one trip,” Garvin said. “But I don’t drive nearly as much as I used to. I have been walking a lot of places, whether it is the hotel I work at or if I am going out with friends.”
Garvin’s experience resonates with most of the population. According to the U.S. Energy Information Administration (EIA), the Midwest region saw its first large spike in regular gas prices in late February of this year, with a gallon of gas jumping from $3.352 to $4.091 in less than a month. That cost continued to rise until it hit it’s recent peak at $5.19 per gallon.
“Inflation has been hurting my spending to the point where I can hardly buy groceries, let alone gas,” Garvin said. “With it being summer time I am able to walk most places, but when school starts again and my internship ends I think it will be a hard time.”
Crude oil is a widely-used global commodity, so its position in the world of supply and demand heavily impacts the price of gasoline. In addition to the price of crude oil, the process of refining, distributing, and marketing gasoline also influences gas prices. The fluctuation in the cost of these four factors, plus individual state and local taxes, help explain current fuel prices.
In the EIA’s most recent report, of the $4.44 per gallon average that Americans were paying at the pump in May of 2022, 59% was for the cost of crude oil, 26% the refining process, 5% for distribution and marketing, and 11% for taxes.
“It has gotten to the point where I will check Google Maps to view all of the gas stations in the surrounding area and see who has the cheapest prices before leaving my house,” Garvin said.
With the 2022 school year fast approaching for college students, Garvin and others who work throughout the summer will have to prepare for the end of their internships and full-time jobs, reverting back to the part-time schedule that most students hold throughout the school year. Unfortunately, this change marks the end of their increased cash flow.
“I am honestly not sure what I will do,” Garvin said. “I have been trying to save as much money as possible right now and I am hoping it makes a difference when the time comes.”
Heavily impacted by the spike in prices at the pump are local trucking companies who have been forced to adjust to the 100 percent cost increase of refilling their fleets of trucks. With over 70 semi-trailers, AM Express Inc. in Escanaba began to feel the ramifications of refilling their 150 to 200 gallon tank trucks in February of 2021.
“Our cost per mile, when it pertains to the fuel cost that we have, has doubled in the past year and four months,” Pat Barron, general manager of AM Express, said. “As a trucking company, fuel has and continues to be one of our greatest costs, and with these substantial increases it has become even more so.”
According to the EIA, the Midwest region’s diesel fuel prices saw their largest increase between February and March of this year, with prices jumping from $3.968 per gallon on Feb. 28 to $5.004 per gallon on March 14. The EIA’s most recent update on June 13 has diesel reaching a high of $5.631 within the region, breaking nationwide records.
In order to alleviate the burden that rising diesel prices have inflicted upon business operation, trucking companies across the country have had to increase the surcharges that freight customers pay to have their goods shipped. Every Monday, the U.S. Department of Energy releases the average price of diesel per gallon, allowing trucking companies to calculate a surcharge that ensures profitability from their services.
“We have our regular rates, but then we have a fuel surcharge which has been pretty minimal up until the rise in diesel began,” Barron said. “As all trucking companies continue to feel this challenge, in order to stay in business we have to instill a surcharge on the price of our deliveries.”
This process, however, has a trickle-down effect that ultimately influences the price of every-day goods and services. As trucking companies apply surcharges to cover the rising cost of diesel fuel, their customers increase the price of their products. This cycle flows straight down to the average consumer, who feels the impact when grocery shopping or going out to eat.
“Fuel, when it rises like it has, is part of a flow-through cost. So if fuel prices are down, everything costs less. If fuel prices are up, everything costs more,” Barron said. “This leads to all the prices of goods you buy, everything from your drive-thru foods to anything in your cars or homes, costing you more.”
AM Express ships a variety of products, including general merchandise, on a daily basis. But just like the freight customers they ship to, the company has felt the impact of surcharges and increased prices when they are in need of products in house.
“The rising prices have impacted the prices of our parts. From all of our lubricants, oils, and greases to belts, hoses, and tires. Anything that goes on a semi-tractor has increased in price,” Barron said. “That effect is flowing through to us. Everything that we have to buy to run our business has risen since fuel prices nearly doubled.”
Diesel and regular prices are projected to increase throughout 2022 pursuant to current economic projections made by the U.S. Energy Information Administration.